2016 tax returns determine 2018 Medicare premiums
High-income surcharge based on new brackets next year
As your older clients gather their financial documents to file their 2016 federal income taxes, they should pay close attention to the bottom line on their tax return. Their adjusted gross income in 2016, plus any tax-exempt interest income, will determine next year’s Medicare premiums.
Many Medicare beneficiaries will be surprised to learn that some of the income brackets which determine Medicare premium surcharges for high-income retirees will change in 2018. Essentially, some higher-income seniors will shoulder a larger share of Medicare costs in 2018 even if their income remains at current levels.
Individuals whose modified adjusted gross income (MAGI), which includes tax-exempt interest, tops $85,000 and married couples whose joint income tops $170,000, pay higher premiums for both Medicare Part B, which covers doctor visits and out-patient services, and Medicare Part D, which covers prescription drugs costs.
There are five income tiers and if your MAGI exceeds an income bracket by just $1, you are catapulted into the next tier and will pay a higher surcharge. Medicare premiums are based on the latest available tax return, so 2018 premiums will be based on 2016 tax returns filed this year.
In 2017, most new enrollees in Medicare Part B pay a standard premium of $134 per month. So do existing Medicare beneficiaries who do not receive Social Security benefits. But most other retirees who have their Medicare Part B premiums deducted directly from their Social Security benefits pay less.
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