Will I be taxed on the Medicare premium out of my SS?

[HadEnuff]

I will soon be Medicare eligible. Part B premiums will come out of my SS benefit, as will Part D premiums.

Will the taxable amount of my SS include the premiums?

Thanks,

 

[REWahoo]

Yes, they will be included in the Net Benefits amount shown in Box 5 of your Form SSA-1099.

 

[gauss]

+1

Medicare premiums are deducted after-tax.

This is contrast to employer provided health insurance premiums which are deducted pre-tax for active employees.

That being said, they may be deductible on Schedule A if you have enough expenses or reimbursable via an HSA. Note that Medigap/Supplemental premiums do not qualify for HSA reimbursement.

-gauss

 

[audreyh1]

Does the SS administration do any tax withholding?

 

[REWahoo]

Does the SS administration do any tax withholding?

Yes.

 

[Bir48die]

Yes.

You just need to inform them that you'd like to withhold. There are four levels with the maximum at 25%

 

[athena53]

Does the SS Administration do any tax withholding?

Yes.

I agree but the default is that they don't. It was quite a sticker shock when I calculated taxes the first year DH and I married; he started SS, I was working FT. I/we never did set up withholding from SS but at least in future years I was prepared.

 

[HadEnuff]

+1

Medicare premiums are deducted after-tax.

This is contrast to employer provided health insurance premiums which are deducted pre-tax for active employees.

That being said, they may be deductible on Schedule A if you have enough expenses or reimbursable via an HSA. Note that Medigap/Supplemental premiums do not qualify for HSA reimbursement.

-gauss

So Part B premiums are reimbursable from my HSA? But not Medigap? How about Part D?

 

[gauss]

So Part B premiums are reimbursable from my HSA? But not Medigap? How about Part D?

Part D - yes. Medigap no.

Let me find a reference for you....

ok got it. From IRS Pub 969 - Health Savings Accounts and Other Tax-Favored Health Plans

Insurance premiums. You can’t treat insurance premiums as qualified medical expenses unless the premiums are for:
Long-term care insurance.
Health care continuation coverage (such as coverage under COBRA).
Health care coverage while receiving unemployment compensation under federal or state law.
Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap).

-gauss

 

[REWahoo]

I agree but the default is that they don't. It was quite a sticker shock when I calculated taxes the first year DH and I married; he started SS, I was working FT. I/we never did set up withholding from SS but at least in future years I was prepared.

I recall a prominent question on the SS enrollment form asking if I wanted 10% withheld for taxes. I can't imagine why anyone would decline unless their income was below the level where they would be taxed.

 

[athena53]

I recall a prominent question on the SS enrollment form asking if I wanted 10% withheld for taxes. I can't imagine why anyone would decline unless their income was below the level where they would be taxed.

OK, I stand corrected! DH was the first to sign up and he did that at the SS office. I was the CFO in the marriage and I guess he just figured the taxes wouldn't amount to much, or had no idea how much to withhold so he selected zero. I don't even remember being presented with options when I signed up for Survivor benefits but I probably was, and would have selected zero because I was used to it.

 

[audreyh1]

I agree but the default is that they don't. It was quite a sticker shock when I calculated taxes the first year DH and I married; he started SS, I was working FT. I/we never did set up withholding from SS but at least in future years I was prepared.

Yeah - I noticed that my Dad doesn't do any withholding, so I wondered if it was an option.

 

[Koolau]

I will soon be Medicare eligible. Part B premiums will come out of my SS benefit, as will Part D premiums.

Will the taxable amount of my SS include the premiums?

Thanks,

One of the reasons I like this forum is that I'm constantly learning something. Honestly, I never even considered this question. Since some of our taxable income is taxed at the (sorry, I forget the new %, it WAS 25%) that is a significant amount of taxes if I think of my MC premiums being taxed at the 20+% level. We never have enough medical deductions to reach the lower limit for deductibility.

I've always thought that MC was a real bargain for HC. However, it occurs to me that there are some real costs and some phantom costs. Think with me a minute:

MC Costs to the Consumer

MC Premium - higher for those of us not grandfathered and quite a bit higher if your MAGI is too high. (Happened to us one year when we got caught needing to pay taxes on depreciation recapture upon sale of our condo.)

Payroll taxes until you FIRE (forget the % but it was over 1%.)

Higher cost on all medical services to cover the hit taken by providers when they treat MC patients.

Taxed MC premiums taken from SS

Co-pays or whatever our share of health charges is under MC.



Have I missed anything? Actually, MC still seems like a bargain when I think of our share of some of our recent procedures covered by MC. Naturally, YMMV.

 

[HadEnuff]

Part D - yes. Medigap no.

Let me find a reference for you....

ok got it. From IRS Pub 969 - Health Savings Accounts and Other Tax-Favored Health Plans



-gauss

thanks again for the information and the references.

 

[gauss]

Glad to help!

 

[Souschef]

I do not have any with holding from either my SS or DW's. However, I do make Quarterly Estimated Tax payments.

 

[MBSC]

I've always thought that MC was a real bargain for HC. However, it occurs to me that there are some real costs and some phantom costs. Think with me a minute:

MC Costs to the Consumer

MC Premium - higher for those of us not grandfathered and quite a bit higher if your MAGI is too high. (Happened to us one year when we got caught needing to pay taxes on depreciation recapture upon sale of our condo.)

Payroll taxes until you FIRE (forget the % but it was over 1%.)

Higher cost on all medical services to cover the hit taken by providers when they treat MC patients.

Taxed MC premiums taken from SS

Co-pays or whatever our share of health charges is under MC.

Have I missed anything?

There are also transfers from the general fund to cover Part B expenses. For those not on IRMAA, the Part B premium only covers about 25% of Part B costs. These transfers are separate from the payroll taxes that fund Part A.

The standard monthly Part B premium rate for 2018 is $134.00, which is equal to approximately 25 percent of the expected average total cost of Part B coverage for aged enrollees...If a beneficiary has to pay an income-related monthly adjustment, he or she will have to pay a total monthly premium of about 35, 50, 65, or 80 percent of the total cost of Part B coverage.

The premiums paid by (or on behalf of) all enrollees fund approximately one-fourth of the total incurred costs, and transfers from the general fund of the Treasury pay approximately three-fourths of these costs.

Source: https://www.federalregister.gov/doc...ial-rates-premium-rates-and-annual-deductible