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Does Owning a Home Affect Medicare?

Generally speaking, owning a home does not affect Medicare coverage. While Medicare charges higher premiums for beneficiaries above specified income thresholds, it will not restrict enrollment based on a person’s annual earnings or held property values. If you plan to keep your house long-term, homeownership will not compromise your Medicare premiums.

However, selling homes or life estates for significant profits could increase your taxable income. If these newly combined earnings exceed $103,000, you must begin paying inflated Part B and Part D monthly premiums to maintain coverage. Even so, many home sellers can take advantage of various tax deductions to prevent such income spikes.

How Are Medicare Costs Calculated? 

Medicare costs can vary depending on what benefits you have opted into, your work history,  and the amount of medical care you require. While anyone who has worked and paid at least 40 quarterly credits of Social Security taxes will automatically receive premium-free Part A on their 65th birthday, people below this threshold must either pay a $278 or $505 Part A monthly premium.

Meanwhile, Part B costs $174.70 monthly for all beneficiaries and incrementally more for high-income individuals. Part A and Part B both require patients to meet annual deductibles before covering medical services and can charge varying coinsurance rates for eligible care. These costs may differ if you have Medicare Advantage, Part D, Medigap, or unique long-term care expenses.

How Does Homeownership and Medicare Work? 

Selling a house while on Medicare can increase your taxable income and occasionally impact your Part B and Part D monthly premiums.

Taxable Income and Medicare 

While most beneficiaries receive Original Medicare for a standardized cost, people with taxable incomes above specific thresholds must pay higher premium rates. The IRS taxes the following monetary sources:

  • Wages
  • Salaries
  • Commissions
  • Rental income
  • Royalty payments
  • Stock options
  • Dividends and interest
  • Self-employment income
  • Unemployment income

Selling high-value assets like real estate can significantly raise your taxable income and impact your Medicare premiums. Depending on the sale price, these income-related monthly adjustment amounts (IRMAA) can affect the cost of Part B and Part D coverage two years from the affiliated tax return. For example, a property sale reported on your 2021 return would alter your 2023 Medicare premiums.

At A Glance: IRMAA 

The Social Security Administration will alert you of any IRMAA dues following a home sale. 2024 IRMAA thresholds are as follows:

Individual tax returns with a modified adjusted gross income of:
Joint tax returns with a modified adjusted gross income of:
Total monthly Part B premium:
$103,000 or less
$206,000 or less
$103,000 to $129,000
$206,000 to $258,000
$129,000 to $161,000
$258,000 to $322,000
$161,000 to $193,000
$322,000 to $386,000
$193,000 to $500,000
$386,000 to $750,000
$500,000 or more
$750,000 or more

According to the Centers for Medicare and Medicaid Services, these combined increases only affect roughly 8% of Part B beneficiaries.

When Are Home Sales Considered Taxable Income? 

When you sell certain assets, such as stocks or bonds, you must report gains and losses to the IRS. Therefore, if you sell your home, the profits count as taxable income. For example, if someone bought a house for $500,000 in 2018 and sold it for $800,000 in 2023, they would report $300,000 in profits to the IRS.

However, the same individual might access a capital gains deduction of up to $250,000 by proving they primarily lived in the home for at least two of those five years, resulting in only $50,000 of increased taxable income. Meanwhile, while selling your house for a loss will not increase your taxable income, the IRS would consider it a nondeductible personal expense.

Do Capital Gains Affect Medicare? 

Any asset that has earned value during your ownership and gets sold for profit – such as a home, car, or business – counts as a capital gain. Regarding Medicare, capital gains will never compromise your program eligibility and only affect your monthly premium if your adjusted taxable income exceeds $103,000 in 2024.

Because of the Tax Payer Relief Act of 1997, individual homeowners and married couples who sell their properties for less than $250,000 or $500,000, respectively, can deduct these capital gains from their tax returns and avoid paying higher Medicare premiums. To claim these exclusions, you must file a Form 1099-S with the IRS and report the total sale amount.

How Does a Reverse Mortgage Affect My Medicare Coverage? 

Reverse mortgages are essentially loans that allow homeowners to convert some of their home equity into cash. Therefore, receiving funds from a reverse mortgage would not impact your taxable income, Medicare eligibility, or premium rates. However, it could affect your ability to secure needs-based programs like Medicaid or Social Security Income (SSI) insurance.

Can I Qualify for Additional Medicare Benefits if I Have a Low Income and Own a Home? 

Low-income Medicare beneficiaries can enroll in various Medicare Savings Programs to reduce premiums and other out-of-pocket expenses or receive prescription drug assistance through “Extra Help.” While people with stocks, bonds, and retirement savings that exceed specified thresholds may lose eligibility, Medicare does not count your primary residence as a quantifiable asset.

However, if you sell your primary home, affiliated non-deductible profits can make you ineligible for these and other savings benefits.

Putting It All Together 

All seniors 65 and older have Medicare eligibility, regardless of their annual income or held resources. However, people above specified thresholds often must pay higher monthly premiums to retain Part B and Part D coverage. Even if you earn an average salary, selling a home while on Medicare could increase your taxable income and result in temporary premium spikes.

Before selling a house, talk to an accountant or real estate agent about how profits may affect your taxable income and whether you can file capital gains deductions on your return. Likewise, contact the Social Security Administration for questions regarding your Medicare coverage and costs relative to your earnings.

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