The More Things Change, the More They Stay The Same

July 2017 Newsletter

Do you have retired clients with $134,000 of income? Are they aware of the higher Medicare tax about to hit them?

As the US Senate struggles to craft legislation to repeal and replace the Affordable Care Act, one piece of significant legislation remains unchanged. Higher income Medicare enrollees currently pay higher premiums for Medicare Parts B and D. These higher premiums are called Income Related Monthly Adjustment Amounts (IRMAA). The brackets determining the amount of these premiums will change in 2018.

In 2015, when the Medicare Access and CHIP Reauthorization Act announced the new brackets, there was minimal press coverage or objection to this tax increase. After all, implementation was still a few years away. Now that 2018 is just a few months away, it is time to make sure our clients are aware of the change.


Current Brackets Single Current Brackets Joint
$85,000 or less $170,000 or less
$85,001-$107,000 $170,001-$214,000
$107,001-$160,000 $214,001-$320,000
$160,001-$214,000 $320,001-$428,000
Above $214,000 Above $428,000
2018 Brackets Single 2018 Brackets Joint
$85,000 or less $170,000 or less
$85,001-$107,000 $170,001-$214,000
$107,001-$133,500 $214,001-$267,000
$133,501-$160,000 $267,001-$320,000
Above $160,000 Above $320,000

Since most retirees pay their Medicare premiums via a deduction from their Social Security Benefit, this tax will manifest itself with a reduction from their Social Security Benefit. The income your clients earned in 2016 will determine their 2018 bracket. Although the actual amounts of the Medicare Premiums won’t be announced until October or November, your clients can determine their 2018 bracket.

As the brackets show, a single tax filer with MAGI exceeding just $133,500 will land in the third bracket!

There are a few financial planning considerations that are particularly important:

  • Modified Adjusted Gross Income includes municipal bond interest so make sure to connect with your clients that have especially large positions in this asset class.
  • Clients who retired in 2017 or will be retiring in 2018 most likely have lower income than they did in 2016 while still employed.  These clients can file form SSA-44 with their local Social Security office to request their current income level be used instead of their 2016 income. See last month’s newsletter, “A Bit of Good News”, for more detail.
  • Clients who lost a spouse due to death or divorce and are now filing as a single tax payor can file SSA-44.

Remember that income from Health Savings Accounts when used for qualified medical needs, Roth IRA and Roth 401(k) do not impact the IRMAA.  Encourage clients to accumulate retirement savings in these programs.

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The information in this presentation is provided as a general overview. It is derived from the Internal Revenue Code, and other government publications, all subject matter sources reasonably believed to be reliable.  Tax law and the laws governing Medicare/Medicaid are complex and subject to change. Clients should consult with their attorney and/or qualified tax advisor when making decisions regarding these matters.

PO Box 8151 | Wayne PA 19087 | USA