How Taxes Affect Medicare Costs
Tax season is here! This time of year can be stressful as there are countless deadlines to meet and forms to complete. What many Americans do not know about tax season, that it in turn affects your Medicare costs. How, you might ask?
Medicare Part B and Medicare Part D premiums are based on modified adjusted gross income from tax fillings from two years ago. This is what we call an Income Related Monthly Adjustment Amount (IRMAA). For 2022, Social Security will look at 2020 tax filings and if you filed jointly and made 182,000 dollars or less or filed individually and made 91,000 dollars or less, you will pay what is considered the “normal” monthly premium which is currently $170.10. This chart below outlines associated Part B premiums.
The Part D monthly premium varies by the plan in which you choose to enroll in. Again, higher income earners may be subject to higher premiums based on their modified adjusted gross income. If you file jointly and made 182,000 dollars or less or file individually and made 91,000 dollars or less, you will pay only the premium of whichever plan you choose. However, if you make more, you will be charged your drug plan’s premium, plus an additional $12.40 a month and so on as the chart progresses through the different income brackets.
What about HSA’s?
If you are on a high deductible health plan and receiving an HSA (Health Savings Account) through an employer, it is important to note how enrolling into Medicare might affect the benefits of an HSA. It is always recommended to speak with a tax professional. However, enrolling into Medicare Parts A, and or B, will cause you to longer be able to contribute pre-tax dollars to an HSA account. This is because you cannot contribute pre-tax dollars to an HSA if your health insurance is not a high deductible health plan. You will still be able to continue to withdraw funds from the HSA while on Medicare though, for qualified medical expenses.
It is important to consult a tax professional if you choose to continue on employer coverage past 65, because it is widely recommended to stop contributing to an HSA account six months prior to enrolling into Medicare Part B upon retirement. This is because once enrolled into Medicare Part B, six months of retroactive coverage can be applied on Part A (going no further back than your initial eligibility month) and can cause a tax penalty.
If you are worried about Medicare deadlines, penalties, and how taxes affect your cost; connect with one of our agents by calling VibrantUSA at 866-733-5111.