Are Capital Gains Considered Income for Medicare?

Posted by Sebastian Abrigo on Nov 19, 2022

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Congress added Medicare health insurance to Social Security benefits in 1965. The original provisions offered coverage to people aged 65 and older, plus some younger individuals with disabilities. There are currently other eligible groups, which have been added over time.

Medicare consists of Part A, which covers inpatient hospital care, nursing facilities, and hospice treatment. Most people who have worked ten years or more do not pay a premium for Medicare Part A. Medicare Part B covers doctor’s services, outpatient care, preventive care, and medical supplies. Many people pay a monthly premium for their Part B coverage. Part D was added in 2003 and provides prescription drug benefits. The legislation that added these benefits also created Medicare Advantage Plans, sometimes called Part C plans.

What does Medicare Part B cost?

The standard monthly charge for Medicare Part B in 2022 is $170.10. This amount will drop to $164.90 in 2023. However, there are penalties for some people who could sign up at age 65 but delay doing so. If you incur such a penalty, you will continue to pay it for your lifetime (for a Part B penalty). Coverage costs for Part D prescription drugs vary depending on whether the enrollee has a specific drug prescription program or enrolls in a Part C Medicare Advantage Plan. All program parts have deductibles to pay before the policy starts to cover your costs.

Who pays more than the standard premium for Part B?

If your MAGI (modified Adjusted Gross Income) is above a specified amount, you will pay a higher monthly premium for Medicare Part B:

If your yearly income in 2020 (for what you pay in 2022) was

You pay each month (in 2022)

File individual tax return

File joint tax return

File married & separate tax returns

$91,000 or less

$182,000 or less

$91,000 or less

$170.10

above $91,000 up to $114,000

above $182,000 up to $228,000

Not applicable

$238.10

above $114,000 up to $142,000

above $228,000 up to $284,000

Not applicable

$340.20

above $142,000 up to $170,000

above $284,000 up to $340,000

Not applicable

$442.30

above $170,000 and less than $500,000

above $340,000 and less than $750,000

above $91,000 and less than $409,000

$544.30

$500,000 or above

$750,000 or above

$409,000 or above

$578.30

Are capital gains included in Modified Adjusted Gross Income?

Yes, capital gains are part of the MAGI calculation. For many taxpayers, the MAGI is similar to the AGI (adjusted gross income), but it can be higher, depending on your circumstances. MAGI is your AGI (line 11 of Form 1040) plus tax-exempt interest income. Add in any deductions you took for IRA contributions and taxable Social Security payments, plus deductions for student loan interest, excluded foreign income, deductions for tuition and fees, plus half of your self-employment tax (if applicable.)  

MAGI also determines whether you owe the NIIT (Net Investment Income Tax).

Net Investment income is comprised of income from investment assets. That includes stocks, mutual funds, rental and business income, royalties, mineral rights, annuities, and dividends. NII also includes gains from selling a capital asset like real estate. The amount you pay is complicated and depends on certain thresholds and the activity from which the income is derived.

This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.

Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.

Examples are hypothetical and for illustrative purposes only. Withdrawal strategies should take into account the investment objectives, financial situation and particular needs of the individual.

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