How Selling Your Home Affects Medicare Premiums
If you’re selling your home after age 63, you might be in for a surprise—your Medicare premiums could increase significantly due to capital gains taxes. Because Medicare premiums are based on income, any large capital gains from a home sale can push you into a higher income bracket, resulting in higher Medicare Part B and Part D costs.
In this guide, I’ll break down how home sales impact Medicare premiums, how capital gains are taxed, and key strategies to minimize tax burdens and avoid unnecessary Medicare increases.
How Medicare Premiums Are Calculated
Medicare Part B and Part D premiums are income-based, determined by your Modified Adjusted Gross Income (MAGI) from two years prior. This means if you sell your home in 2025, the IRS will look at your 2023 tax return to determine your 2025 Medicare premiums.
Here’s how higher income affects your Medicare costs:
| MAGI (Individual) | MAGI (Married) | Monthly Part B Premium | Additional Part D Cost |
|---|---|---|---|
| $103,000 or less | $206,000 or less | $174.70 | $0 |
| $103,001 – $129,000 | $206,001 – $258,000 | $244.60 | $12.90 |
| $129,001 – $161,000 | $258,001 – $322,000 | $349.40 | $33.30 |
| $161,001 – $193,000 | $322,001 – $386,000 | $454.20 | $53.80 |
| $193,001 – $500,000 | $386,001 – $750,000 | $559.00 | $74.20 |
| Over $500,000 | Over $750,000 | $594.00 | $81.00 |
Key Takeaway: If your home sale pushes your MAGI above $103,000 (individual) or $206,000 (married), you’ll pay more for Medicare for at least one year.
How Capital Gains Taxes Work When Selling a Home
When you sell a home, you might owe capital gains taxes on your profit. Here’s how it works:
Short-Term vs. Long-Term Capital Gains
- Short-term capital gains (if owned for less than one year) are taxed at your regular income tax rate (10%-37%).
- Long-term capital gains (if owned for more than one year) are taxed at a lower rate (0%, 15%, or 20%).
How Much of Your Home Sale is Taxed?
The IRS allows you to exclude up to:
✔ $250,000 of capital gains for single filers
✔ $500,000 of capital gains for married couples
To qualify for this exclusion, you must:
Have owned the home for at least two years in the last five years.
Have lived in the home as your primary residence for at least two years.
Example:
- If you bought your home for $200,000 and sell it for $700,000, your gain is $500,000.
- If married, the $500,000 exclusion applies, meaning NO capital gains tax.
- If single, only $250,000 is excluded, so $250,000 is taxable at 15%-20%.
Why Selling Your Home at 63+ Can Increase Medicare Premiums
- Home sale profits count as income, meaning your MAGI increases significantly.
- If your taxable capital gain is large enough, it pushes you into a higher Medicare bracket for at least one year.
- This could mean hundreds or even thousands of extra dollars in Medicare premiums.
Example:
- Bill & Susan sell their home for $900,000.
- They originally bought it for $250,000.
- Their taxable capital gain is $150,000 after the $500,000 exclusion.
- This extra income pushes their MAGI over $386,000, increasing their Medicare Part B premium by $279/month per person for the next year!
Strategies to Minimize Capital Gains Taxes & Medicare Increases
1. Sell in Stages If Possible
If selling multiple properties, spread the sales over different years to avoid a single year of high income.
2. Offset Gains with Capital Losses
If you have investment losses, use them to offset taxable gains and lower your MAGI.
3. Move into Your Rental Property Before Selling
If you own a rental property, live in it for two years before selling to qualify for the $250K/$500K tax exclusion.
4. Consider a 1031 Exchange for Investment Properties
If selling investment property, a 1031 exchange lets you defer capital gains taxes by reinvesting in another property.
5. Time Your Sale Strategically
Since Medicare premiums are based on income from two years prior, try to sell in a lower-income year (e.g., right before retirement).
6. Appeal the Medicare Premium Increase
If your income dropped significantly after selling your home, you can request a reduction in Medicare premiums by filing Form SSA-44 with the Social Security Administration.
Final Thoughts: Plan Your Home Sale to Protect Your Medicare Costs
Selling your home can affect your Medicare costs if you don’t plan properly. However, with careful timing and tax strategies, you can minimize capital gains taxes and avoid unnecessary Medicare premium increases.
Key Takeaways:
Medicare premiums increase if capital gains push your income over $103,000 (individual) or $206,000 (married).
The $250K/$500K tax exclusion can help reduce taxable income from a home sale.
Smart planning—like offsetting gains with losses or using a 1031 exchange—can lower tax burdens.
You may be able to appeal a Medicare premium increase if your income drops after the sale.
Have you considered how selling your home will impact your Medicare costs? Let me know in the comments!
