You may have heard horror stories about fellow Medicare recipients losing their coverage after selling their home. You may even be considering the sale of your own home, whether in an effort to downsize and manage your post-retirement costs or to move closer to friends and family. Will the sale of your house, possibly a one-time event, put you into a high-income category and affect your coverage? Does selling your home affect Medicare? We’ll answer those questions in the following article.
Fortunately, it is extremely unlikely that your benefits under Medicare Part B (general medical insurance) or Medicare Part D (prescription drug coverage) will be negatively affected. However, the sale of your home could impact the price you pay for those benefits in the form of increased monthly premium fees.
Medicare generally charges higher rates for Part B and Part D coverage if you have high income. The question is whether or not the sale of your home will change what is known as your Income Related Monthly Adjusted Amount, or IRMAA for brevity’s sake. The federal government examines your federal tax returns to see if your income changes and is subsequently high enough to cause a Part B or Part D premium increase. It normally takes two years for the government to catch up with your home sale records, so if you sell your property in 2016, any premium adjustments will likely take effect in 2018.
Increased charges will result if your modified adjusted gross income exceeds $170,000 in a given year, assuming you are married. If you are single, surcharges will result once your MAGI tops $85,000 annually.
Selling your home may not affect premiums
In some cases, selling your home may not affect your Medicare premiums at all. This is because tax laws often allow a large exclusion on the sale of your final home. The term ‘final home’ is used when it is assumed that you will not be investing the proceeds from the sale into another house. If you are purchasing another house, or your income from the preceding sale is large enough for Medicare to flag you as part of its IRMAA adjustments, you may see your premiums increase for a single year. You may elect to file an appeal under the IRMAA change of life income shift guidelines. Medicare publishes a list of qualifying change of life events, which include things like spousal death, divorce, work reduction or stoppage, etc. All of these events involve a loss of income, though, whereas the sale of your home likely involves an income increase.
If you choose to continue with the appeals process anyway, the process involves petitioning the Social Security administration via Form SSA-561. If successful, the appeal may persuade Medicare to amend any premium increases, though it is far from guaranteed given the bureaucracy involved.