If you are a senior and you accelerated income into 2012 to avoid the potential higher capital gains taxes in 2013, you may end up paying a higher premium for Medicare Part B and prescription drug coverage this year.
The Social Security Administration uses the most recent tax return the IRS provides, which is often the return two years prior to the year for which you must pay an income-related premium. Basically, if your modified adjusted gross income was above $170,000 for married filing jointly, you will likely have to pay higher Medicare premiums.
The SSA uses your modified adjusted gross income (MAGI) to determine if you pay higher premiums on Medicare Part B and your Medicare prescription drug coverage. For several years, the SSA has required higher-income beneficiaries to pay more for Medicare Part B and prescription drug coverage. In general, if your MAGI is above $85,000 for individuals, or $170,000 for married couples, you are required to pay a higher premium.
The SSA has a sliding scale to determine the amount of your income-related monthly adjustment, which is in addition to your standard premium. Most seniors pay the Part B premium of $104.90 each month. Individuals with income above $85,000 up to $107,000 (married couples with income above $170,000 up to $214,000) should pay an additional monthly amount of $42 for Part B, and $12.10 plus your plan premium for prescription drug coverage. At the high end, if your MAGI is above $214,000 ($428,000 for couples), your income-related monthly adjustment should be an additional $230.80 for Part B and $69.30 plus your plan premium for prescription drug coverage.
Keep in mind, as the standard premium for Medicare Part B increases, the sliding scale used to calculate the income-related monthly adjustment will likely increase. Thankfully, an increased premium is not forever. The SSA reassesses income-related premiums on an annual basis.
If you file an amended return that reduces your MAGI, contact the SSA if it could reduce your Medicare Part B premium. Additionally, if you experience a life-changing event, file SSA Medicare Income-Related Monthly Adjustment Amount Life-Changing Event form, such as, marriage or divorce; death of spouse; work stoppage or reduction; loss of income-producing property; loss of pension income, or employer settlement payment. This allows you to request a reduction in your income-related monthly adjustment. You must supply evidence of the life-changing event. If the SSA uses estimated MAGI information to determine if you must pay an additional premium, they will later check with the IRS to verify your report.
At Henssler Financial we believe you should Live Ready, and that includes understanding how your income may affect your future Medicare costs. If you have questions regarding your financial planning strategy, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at [email protected].