Means-testing Medicare Part B premiums

I understand that premiums for Medicare Part B will be means-tested starting in 2007. For a single person with income between $80 to $100K, he/she will pay 1.4 times the standard monthly premium. Between $100K to $150K he/she pays

2 times as much, between $150K and $200K, 2.6 times as much, and above $200K, 3.2 times. These income limits double for married filing joint. I also understand that the income test is based on one's income two years prior to the year the premium increase kicks in. Question 1: Is my understanding correct?

Question 2: What counts as income - AGI, taxable income, other? Question 3: Other things being approximately equal, is it feasible to minimize this extra bite for a married couple by registering the couple's accounts in, say, the wife's SS number, and letting her take the brunt of the income (assuming that interest, dividends, and cap gains represent the bulk), and filing as married-separate? In this way, only the wife might be subject to the means-testing. Question 4: What are some strategies for eliminating/minimizing the impact of means testing? For example, a person or couple might try to reduce the extra bite to every other year by bunching up charitable deductions, state income tax, etc. to every other year, alternating with the standard deduction, and at least getting to pay only the standard Medicare premium every other year. I appreciate any insights or approaches.

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Reply to
lyelowitz
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The mAGI for 2005 is used for 2007, and can be appealed if very unusual events have changed your circumstances. Death of a spouse is an example. mAGI is defined in a Medicare bill, not part of Title 26, and I don't recall exactly how it is defined. Being an Ohio preparer, I file many many MFS returns, and as long as you are not in a community property state, I see nothing wrong with filing MFS to avoid paying higher premiums. Who knows? It might actually save you money, especially if you have large medical or employee or casualty loss expenses. If either of you is on Social Security then 85% of that social secuity will be included in taxable income. __ Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

Reply to
Arthur Kamlet

I haven't checked your multipliers, but conceptually you are correct.

Other. It's a form of MAGI which includes certain nontaxable income, primarily tax-exempt interest.

Sure, that might work. However, the difference in Medicare B premiums is only a few hundred dollars even at high income levels. I'm reasonably certain that the additional tax bite from making the changes you suggest and filing MFS will be much larger. Of course, you should run the numbers yourself.

Since the means test is based on MAGI, nothing you do with your deductions will have any impact. Ira Smilovitz

Reply to
Ira Smilovitz

The mAGI for 2005 is used for 2007, and can be appealed if very unusual events have changed your circumstances. Death of a spouse is an example. mAGI is defined in a Medicare bill, not part of Title 26, and I don't recall exactly how it is defined. Being an Ohio preparer, I file many many MFS returns, and as long as you are not in a community property state, I see nothing wrong with filing MFS to avoid paying higher premiums. Who knows? It might actually save you money, especially if you have large medical or employee or casualty loss expenses. If either of you is on Social Security then 85% of that social secuity will be included in taxable income. __ Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

Reply to
Arthur Kamlet

I haven't checked your multipliers, but conceptually you are correct.

Other. It's a form of MAGI which includes certain nontaxable income, primarily tax-exempt interest.

Sure, that might work. However, the difference in Medicare B premiums is only a few hundred dollars even at high income levels. I'm reasonably certain that the additional tax bite from making the changes you suggest and filing MFS will be much larger. Of course, you should run the numbers yourself.

Since the means test is based on MAGI, nothing you do with your deductions will have any impact. Ira Smilovitz

Reply to
Ira Smilovitz

The brackets are supposed to phase in over several years, eventually reaching 4x(*) for $200K the next decade or about $380 a month in 2007 dollars.

(*) In reality mdeicare is supposed to discounting hospitalization by 75%, but the discount will be removed for the well-to-do.

Reply to
rick++

I too asked about strategies about tax planning to minimize mAGI a few months ago.

- one might take early withdrawals for deferred acounts as not to be forced to take large one at age 70 and crank up the mAGI.

- one might consider "Rothing" as much of ones deferral savings when the ceiling is temprorarily lifted in 2010. May require a two-step conversion of a 401k to ordinary IRA then to Roth. Right now the medicare premium ($122) is about 8% of median social security check. But with premium inflation of 35% in the past three years and a means penalty up to 300%, the premium has a potential to execeed $1000 and half of the SS check of by the 2020s.

Reply to
rick++

Possible duplicate answer as original reply has not shown: Q1: No, it is incorrect. See the following link for the

2007 premiums. E.g., a single person with MAGI between $80 to $100K pays $105.80, a 13.2% premium.
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Q2: It is MAGI as defined in IRC Sec. 62 disregarding Secs. 135, 911, 931, and 933 and adding back tax exempt interest. Secs. 135, 911, 931 & 933 refer to any savings bond interest excluded for higher ed purposes, the foreign earned income or housing exclusion and any income excluded from sources within Guam, American Samoa, or the Northern Mariana Islands & Puerto Rico. Q3. It is probably not feasible if you continue to live together. Congress thought of this and the law uses a different set of factors. See the link I referenced above for the rates for those who file separate and live together.
Reply to
A.G. Kalman

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