New legislation that was recently passed, known as the "Doc Fix" also has provisions that will change the income tiers for Medicare premiums beginning in 2018 (based on your income from the 2016 tax year). While this is not the focus of the new law (Medicare Access and CHIP Reauthorization Act of 2015) it is one component of it that will impact higher income individuals and couples with Medicare Part B & D.
Last year we wrote a series of blog entries outlining Medicare. See the link below to the one highlighting Medicare premiums:
http://singlepointpartners.blogspot.com/2014/11/medicare-part-b-d-premiums-other-costs.html
If you are single and have a Modified Adjusted Gross Income (MAGI) of $107,000 or less, or, if married and your MAGI is $214,000 or less these changes will not effect you.
There are 5 income tiers for Medicare premiums (Part B & D). Each income tier comes with it a higher premium, with the base premium in Tier 1 being $104.90/mo.
Part B Premiums by Tier 2015
Tier 1 = $104.90
Tier 2 = $146.90
Tier 3 = $209.80
Tier 4 = $272.70
Tier 5 = $335.70
Tiers 4 and 5 are where the changes appear. Essentially, lowering the top end of these tiers which will push people into the higher premium tier faster.
As you can see, the highest tier of income pays $2,769.60 per year more in Medicare Part B premiums than Tier 1 ($335.70 vs. $104.90/mo).
Beginning in 2018, married couples will reach Tier 4 at $267,000 of MAGI, instead of $320,000 MAGI. So, if your MAGI is between $267k-$320k expect your Medicare premiums to be going up. For single filers it occurs at $133,500 instead of the current $160,000 mark.
Tier 5 is reached for married couples at $320,000 instead of the current level of $428,000. For single filers it occurs at $160,000 instead of $214,000 currently.
To us, the important take away is that these Medicare tiers are another factor to monitor in your cash flow and tax planning for those with Medicare. If you are right on the cusp of one of these tiers, it may be worth looking at some year end tax strategies that can help keep you in the lower premium income tier.
Single Point of View is our way to occasionally share planning ideas relating to personal finance. Our goal is to pass along concepts that you may not be exposed to on a daily basis.
