A first world problem, but it still sucks

[statsman]

My wife is on Medicare (will be 67 next month). I am 61, so I have several more years to go. Back in late 2018, we sold our house in California (Silicon Valley) that we owned for over 23 years. We were fortunate to live in an area where the house sold for a bit over four times what we paid for it. As such, we ended up with a whopping capital gains tax bill for 2018 (*well* beyond the $500k exemption).

Now comes the one year punishment. My wife's Medicare monthly premium will be maxed out for 2020, about $400/month more than the base Medicare premium. This year (2019), our taxable income will be near $75k, so her Medicare premiums will bounce back to the base cost in 2021.

We're hoping to save a little money by switching her out of Plan F supplemental to Plan G, particularly in light of Plan F costing a little over $30/month more than Plan G. I guess they're trying to make Plan F less attractive going forward. But we have to double-check to see if she can do that. Something about not being Guaranteed Issue for Plan G (only Plan F).

 

[Offgrid Organic Farmer]

... we ended up with a whopping capital gains tax bill for 2018 (*well* beyond the $500k exemption).

What did your accountant recommend you do to shelter you from capital gains taxes?

I have sold real estate several times where there could have been a high capital gain tax bill.

 

[pb4uski]

^^^^ OOF, they sold their personal residence, not an income producing property.... the first $500k was tax free but they paid capital gains tax on the excess of the gain over $500k (I'm guessing at 15% but it might fave been more).

 

[foxfirev5]

With all due respect, in light of the magnitude of your windfall, an additional $4800 in premiums for one year is minimal. Look on the bright side. Only one of you is on Medicare and the penalty is a single event, not an ongoing expense. Heck, DW and I spent more than that on fixing a couple of teeth.

 

[statsman]

^^^^ OOF, they sold their personal residence, not an income producing property.... the first $500k was tax free but they paid capital gains tax on the excess of the gain over $500k (I'm guessing at 15% but it might fave been more).

Correct. And we did go into the 20% capital gains rate with the sale of the house. I can't complain about the "investment" side of owning this home. It will only be a Medicare hit for one year, but it's still an ouch to see.

 

[Offgrid Organic Farmer]

The first time I ever owned a 'personal residence' was after I retired. And I bought it with the proceeds from an income-producing property.