IRMAA and inheritance

[camfused]

I am finding confusing info about this on the web. If I inherit a bunch of money, and a house, this year, will it affect my IRMAA in 2026? Some sites say yes, others say inheritance is not included in MAGI.

Technically, I inherited the house in 2023, but sold it this year. And I liquidated mutual funds (the bunch of money) this year.

So, maybe an issue in 2025 & 2026 tax years?

 

[Dash man]

If you had any gains from the sales of either the house or the funds, it will be taxable in the year of sale. You should get a stepped up basis for the funds and the house as of the date of death. If they appreciated you owe taxes on the appreciation. It may trigger IRMAA. You can deduct sales costs and preparation to sell costs from the sale price of the house.

Check your state for any inheritance taxes that might be due.

 

[camfused]

@Dash man, yes I realize these, but how does it affect IRMMA?

 

[Dash man]

Any income can trigger IRMAA, including capital gains.

 

[MichaelB]

If you had any gains from the sales of either the house or the funds, it will be taxable in the year of sale. You should get a stepped up basis for the funds and the house as of the date of death. If they appreciated you owe taxes on the appreciation. You can deduct sales costs and preparation to sell costs from the sale price of the house.

Check your state for any inheritance taxes that might be due.

Right. IRMAA uses MAGI, modified adjusted gross income. AGI is taken from your tax return, any muni interest is added, and IRMAA is calculated. So the inheritance is not considered income and does not figure, but any gain after the date of the inheritance will.

 

[camfused]

Ok, I get it now. And this is good, since it is just the gain that is counted. Whew. Thanks.

 

[PaunchyPirate]

If you have increased income in 2024 due to capital gains on the sales of the mutual funds and the house that will show up as income on your 2024 tax return. This will be used to determine IRMMA brackets for 2026. There is a 2-year look back. If you have no further income increase in 2025, the IRMMA increase will disappear back to pre-IRMMA levels.

If you had no increase in income showing on your 2023 tax return due to the inheritance, then your 2025 rates will not be impacted.

 

[Koolau]

How does one value the stepped up basis (in this case on an inherited house?) Stock would be simple, I suppose as you can look traded stock up, but a house? Could be complicated - especially in a rapidly rising market.

 

[mathjak107]

you need a professional appraisal done at death ..we had that done when my ex wife inherited a house

 

[Koolau]

you need a professional appraisal done at death ..we had that done when my ex wife inherited a house

Thanks. I assume there must be agencies that do that as a paid service to RE clients.

 

[all4j]

Just to be clear, it isn't just gain from death until sold, it is ongoing gain that results from what is done with the $s assuming they are invested in some way. If you were near the top of a bracket, the incremental income might nudge you over. Sounds as if it doesn't apply here, but many inherit a traditional ira that has to be emptied in 10 years. Those RMDs may well bump into a higher bracket. A one time sale might qualify for a waiver

 

[jebmke]

Thanks. I assume there must be agencies that do that as a paid service to RE clients.

of course. Professional appraisers

 

[statsman]

you need a professional appraisal done at death ..we had that done when my ex wife inherited a house

Definitely. Surprising the number of people who inherit a house who do not do this and sell the house several years down the line. It gets a bit tricky trying to set the basis.

 

[camfused]

I had the appraisal done just after the date of death, since I believed it was required while handling the estate. It actually was not, but I am glad I got it done. It came in a little higher than what the estate agent said it should have been, given the poor condition of the house, but that does not bother me, since it makes my capital gain a little less. Closing on the house this afternoon.

 

[MichaelB]

I had the appraisal done just after the date of death, since I believed it was required while handling the estate. It actually was not, but I am glad I got it done. It came in a little higher than what the estate agent said it should have been, given the poor condition of the house, but that does not bother me, since it makes my capital gain a little less. Closing on the house this afternoon.

Smart move.

 

[Koolau]

Smart move.

I'd settle for lucky - rather than smart, but YMMV.