Selling an investment property in retirement might boost your income—but it could also lead to unexpectedly high Medicare premiums. If you’re not careful, your capital gains might trigger costly adjustments.
This article explains the relationship between capital gains and Medicare and shows how tax planning strategies can help you maintain your earnings and avoid unnecessary expenses.
Most retirees receive Medicare Part A without cost, but must pay monthly premiums for Medicare Part B (outpatient care) and Part D (prescription drugs). These premiums are income-based and determined by your Modified Adjusted Gross Income (MAGI) from two years prior.
That means a significant capital gain from selling an investment property—especially in or near retirement—can increase your MAGI enough to push you into a higher Medicare premium bracket.
This is where IRMAA comes into play.
The Income-Related Monthly Adjustment Amount (IRMAA) represents an additional Medicare premium you must pay when your income exceeds certain limits. The 2025 IRMAA rates, for example, are based on your 2023 MAGI. That means a property sale today could impact your Medicare costs two years from now—and for a full 12-month period.
The increase can be substantial. Even modest capital gains can elevate you into a higher IRMAA tier, which results in significantly higher monthly Medicare costs.
Fortunately, there are planning strategies that can help you manage or reduce the impact of capital gains on your Medicare premiums.
You can defer capital gains taxes by investing the proceeds into similar properties, such as a diversified passive asset portfolio through a Delaware Statutory Trust (DST). It is important to note that strict timing and structural requirements apply.
If possible, you can time your gains across different tax years or delay a sale until your income is lower—such as during retirement. This approach helps minimize IRMAA exposure. However, timing strategies involve trade-offs and potential risks—including changes in tax law, property market conditions, or personal income needs. Delaying a sale to minimize taxes or IRMAA exposure could also result in higher future taxes, missed investment opportunities, or liquidity constraints.
Your Realized CPA can work with you to create a tax-optimized transition plan—one that considers your Medicare premiums, investment goals, and retirement income strategy as part of a coordinated whole.
At Realized, we help investment property owners create tax-efficient real estate portfolios through our Investment Property Wealth Management approach. Our team will assist you in making informed decisions about retirement planning and passive income generation—while working to minimize tax liabilities and avoid surprises like IRMAA surcharges.
The tax and estate planning information offered by the advisor is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.