Social Security Benefits reduced because client sold investment property

[DMICPA]

I recall, a few years ago, a husband and wife retired client sold a rental property for $500,000 and their Social Security benefits were reduced due to the large gain or sale price. I believe they were reduced for two years.

Now I have an elderly client that needs nursing care and she is thinking of selling some land for $200,000, value is $500,000, so a loss would result. I don't want to see her Social Security benefits reduced. If the Social Security benefits are going to be reduced, I would consider advising Her to get a reverse mortgage on Her Principal residence.

Anyone have any experience with this?

Bob

[Bees Knees]

Social Security benefits are never reduced for selling investment property or receiving investment income. Social Security benefits are only reduced when a recipient is below full retirement age and earned income is above the annual limit, OR, the recipient is receiving disability benefits and earned income is above the annual limit.

[Jiggers]

Medicare premiums go up with a large unearned income. That is probably what happened. Sure, their social security check decreased, but it was due to the increase of Medicare premiums, not a reduction in SS benefits.

[FEDUKE404]

Not a Social Security issue at all

I recall, a few years ago, a husband and wife retired client sold a rental property for $500,000 and their Social Security benefits were reduced due to the large gain or sale price. I believe they were reduced for two years.

Now I have an elderly client that needs nursing care and she is thinking of selling some land for $200,000, value is $500,000, so a loss would result. I don't want to see her Social Security benefits reduced. If the Social Security benefits are going to be reduced, I would consider advising Her to get a reverse mortgage on Her Principal residence.

Anyone have any experience with this?

Bob

Your client is confused. Social Security benefits would not be affected in any way by sale of rental property. Well, if they were not yet at the 85% taxable range, their taxes might have gone up, but their benefits were STILL unchanged.

What likely happened is their monthly Medicare B (& D) premium costs (both H/W if > 65 YOA) were increased, beginning at some point after the sale was reported on their income tax return. Folks with high income, as shown on their most recent Form 1040, can face a three-fold increase in their Medicare B premiums for the following year.

The clients would also have received a form letter, usually near the end of the year, from Social Security/Medicare advising them of the upcoming premium changes.

See page 8 of this current pamphlet ( http://www.ssa.gov/pubs/EN-05-10536.pdf ) for more information.

FE