Medicare Premiums & Higher Income

[Jiggers]

The TaxBook, page 22-4, has the premiums for 2015 for higher income earners.

Does anyone have the 2016 premiums for higher income earners?

My client got a notice that doesn't make sense.

She has been receiving Social Security and having Medicare Premiums deducted since 2006.

Her 2014 income did increase significantly and she knew she was going to pay more for her Medicare.

The rate that SS is using is $243.60 per month. They show the calculation as $121.80 for the regular monthly premium and $121.80 for the higher income. She was expecting it to be $209.80 per month, not $243.60.

[kathyc2]

Chart from Medicare for 2016 premiums based on 2014 income: https://www.medicare.gov/your-medica...t-b-costs.html

[FEDUKE404]

Medicare B premium surcharges for higher incomes

Remember you are always a year behind. For instance, on my personal (yet to be filed) 2015 return I will break the "magic income numbers" and, beginning in January of 2017, start paying the higher premiums for all of that year. With luck, my 2016 tax year and 2018 Medicare premiums will return to "normal."

In answer to your question as to why the premiums are not $104.90 x 2, I think that is a result of the technical glitch since there was no 2016 Soc Sec COLA therefore there could be no corresponding increase for existing Medicare B premiums.

In Social Security speak, I imagine the answer will be that she now pays "double the existing premiums" which is not necessarily double the premiums she paid in 2015.

I think the same rules apply to a newbie entering the Land of Medicare: A spouse who was on Medicare last year is probably still paying $104.90 / month but if that person's spouse BEGINS Medicare coverage next month those premiums will be the "current" $121.80 .

If you have not already noted a pattern. . .the Soc Sec and Medicare folks can come up with a LOT of "gotchas!!"

Should you find a definitive answer (mine is NOT! ) you can let us all know.

FE

[Jiggers]

From Medicare site:

"Most people who get Social Security benefits will continue to pay the same Part B premium amount as they paid in 2015."

"You'll pay a different amount in 2016 if: .......Your modified adjust gross income as reported on your IRS tax return from 2 years ago (2014 for my client) is above a certain amount."

So there is an increase in premiums because of the increased income. What isn't know is if the premium will decrease to the original amount because the income has decreased.

I had been telling clients that their premiums would increase due to their income level increase, primarily due to the oil & gas boom here in South Texas. I was using the chart in the TaxBook, but didn't have the correct amount of the premium for the current year (2016). I am changing the form that I use to tell my clients that.

[FEDUKE404]

Citing future Medicare B premiums

From Medicare site:

"Most people who get Social Security benefits will continue to pay the same Part B premium amount as they paid in 2015."

"You'll pay a different amount in 2016 if: .......Your modified adjust gross income as reported on your IRS tax return from 2 years ago (2014 for my client) is above a certain amount."

So there is an increase in premiums because of the increased income. What isn't know is if the premium will decrease to the original amount because the income has decreased.

I had been telling clients that their premiums would increase due to their income level increase, primarily due to the oil & gas boom here in South Texas. I was using the chart in the TaxBook, but didn't have the correct amount of the premium for the current year (2016). I am changing the form that I use to tell my clients that.

Your research pretty well solidifies the general comments I made earlier.

One point of note: Regardless of what is/is not printed in the TTB or shown on the current Medicare web page, I don't think at this time anyone can state the exact cost of the monthly Medicare B premiums starting in January of 2017. That would include with or without the high-income surcharge. To those current high income folks, I just say something like "You should know that, starting in January of 2017, your Medicare premiums (and those of your spouse!) will approximately double [or appropriate verbiage] from their current costs due to your high income as shown on your 2015 tax return."

FE

[Jiggers]

Thanks. I developed a form that told the clients that their premiums would increase in 2 years. For 2014 return, I said it would change in 2016. I was using the TaxBook 2014 premiums.

I am changing the form to use your verbage or something like it, that these are approximate.

Actually it isn't double the current rate, but a graduated rate. It could be as much as 3.2 times the current rate.

A shocker for clients on SS, and large royalty income being taxed at 39.6% plus the 3.8% additional medicare. And then losing their exemptions and itemized deductions.

Thankful that Texas doesn't have a state income tax!

[FEDUKE404]

Tax robbery

Thanks. I developed a form that told the clients that their premiums would increase in 2 years. For 2014 return, I said it would change in 2016. I was using the TaxBook 2014 premiums.

I am changing the form to use your verbage or something like it, that these are approximate.

Actually it isn't double the current rate, but a graduated rate. It could be as much as 3.2 times the current rate.

A shocker for clients on SS, and large royalty income being taxed at 39.6% plus the 3.8% additional medicare. And then losing their exemptions and itemized deductions.

Thankful that Texas doesn't have a state income tax!

I just picked the "double" but there are also ~"triple" and ~"50% more."

Agree on the double whammy. Married couple clients had one good stock sale (buyout) in 2015 that sent them into the stratosphere. Higher AGI/TI, lower medical deductions, limited Sch A expenses, Form 8960, and reduced personal exemption amounts. And now they BOTH have to pay double their "normal" Medicare B premiums for calendar year 2017. And NC does have a state tax, but doesn't have any of the federal-type "gotchas!!"

The gift that keeps on giving. . .

FE

[Rapid Robert]

I always wonder where older taxpayers get the idea they shouldn't have to pay as much tax as others with the same income.

[Burke]

A lot of them think they shouldn't have to pay anything....."since they are retired"..... Every year someone asks me how old they have to be so that they don't have to pay any more.

[Jiggers]

A lot of them think they shouldn't have to pay anything....."since they are retired"..... Every year someone asks me how old they have to be so that they don't have to pay any more.

I tell them maybe 2 tax years after they die.

The year they die is a final 1040.

The 1st tax year after they die is the 1041.

And maybe no 1041 in the 2nd tax year.

[DaveO]

My client comes in and announces "I turned 85 this year, what do I get for that."
I replied "The chance to turn 86."