Tax season is almost over, so as you’re getting everything squared away, you might also want to think about how your taxes will affect your Medicare premiums in the coming years. In fact, you should know that how you file your taxes this year can determine your premiums for 2023 and beyond, and if you’re married or upper-income, you might be in for some surprises. Find out exactly how your taxes this year will affect your future Medicare premiums.
Medicare Part B Premiums
When it comes to Medicare premiums, most individuals will pay the base Part B premium of $170.10 per covered person. Higher-income individuals, though, will not only pay the Part B premium, but will also pay a surcharge, or an income related monthly adjustment amount (IRMAA) on top of it.
How is this IRMAA determined? Your monthly premium depends on your modified adjusted gross income (MAGI) as reported on your 1040 form from two years ago. Your MAGI is your household’s adjusted gross income after any tax-exempt interest income and after factoring in certain tax deductions. So, that means your 2023 premiums will depend on the 2021 MAGI you reported on the 1040 form that you filed in 2021.
For 2022, an IRMAA will apply if you:
- Filed individually in 2020, and reported modified adjusted gross income (MAGI) for that year in excess of $91,000.
- Filed jointly for 2020 and reported MAGI for that year in excess of $182,000.
Deducting Medicare Premiums
If you’re paying a lot for your Medicare premiums, the good news is that you can write them off, as well as any other qualifying health care expenses from the year. In order to do this, you will have to itemize your deductions, and you can only include out-of-pocket medical expenses that exceed 7.5% of your adjusted gross income (AGI).
In addition, if you are self-employed, you can deduct your premiums on Schedule 1 of your 1040 form as an “above the line” deduction, which will lower your AGI. The IRS considers you to be self-employed if you own a business as either a sole proprietor (Schedule C), partner (Schedule E), limited liability company (LLC) member, or S corporation shareholder with at least 2% of company stock.
So remember: what you do with your 2021 1040 form can impact your 2023 Medicare premiums. If you do have a higher income, and are worried about what your premiums will look like in the next few years, try to itemize to get some money back, so you can hopefully offset some of your medical expenses.