Medicare deductions from Social Security payment

[Crabby Mike]

OK, so this is probably either something everybody but me already knew, or else I'm just misunderstanding it ...


I just started Medicare this year at 65, and plan to begin taking Social Security next year at 66 (my FRA), so for now I'm paying my Part B premium and IRMAA surcharge by ACH payment thru my bank. I was recently working on income and expense projections for the coming years, and found (if I'm reading this right) that the Social Security income I'll be reporting on my taxes will be net of the Medicare deductions. Is this true? If so, then my Medicare costs are effectively deductible (taken from pre-tax income, like the health insurance premiums that used to be taken from my paycheck) if deducted from Social Security, but not if paid directly like I'm doing now (since like most people, I will now be taking the higher standard deduction and no long itemizing). I'm too lazy to tackle the math right now, but it seems like that could significantly alter the "when to take Social Security" decision, at least starting at 65 vs. later.


Or am I missing something?

 

[audreyh1]

Wow - if that’s true that is a huge break!

 

[REWahoo]

I was recently working on income and expense projections for the coming years, and found (if I'm reading this right) that the Social Security income I'll be reporting on my taxes will be net of the Medicare deductions. Is this true?

No, it is not true - at least it isn't on the IRS forms I fill out and file every year.

 

[braumeister]

found (if I'm reading this right) that the Social Security income I'll be reporting on my taxes will be net of the Medicare deductions. Is this true?

I'm curious where you read that, because it certainly is not true.

 

[CRLLS]

I believe that Part B premiums are considered a medical expense and are tax deductible if, and only if, you itemize your taxable and all of your medical expenses exceed 7.5% of your taxable income (10% for 2019 tax year).


Sample SSA-1099 forms that I see online show that the Medicare premium is shown, but included on line 5 of that form.


2018 will be the first year for us getting this form so I had to do some looking.

 

[kaneohe]

I'm curious where you read that, because it certainly is not true.

Me too......you need to get that guy to fix it.........maybe it's you that needs fixing?

https://www.irs.gov/pub/irs-pdf/p915.pdf#page=20

IRS makes it easy to find the right number to enter. Box 5 is highlighted and it does say "net" but read what it's net of..........some folks get benefits from prior yr so Box 5 is net of that(or perhaps they repay benefits to SSA). Most people don't and know that what they get in cash to spend is less than the income they have to report........generally by the amount of the premium withheld.

 

[CRLLS]

Here is one filled-out example that I found at https://cotaxaide.org/ta/ It should clear up any confusion:

 

[kaneohe]

............................. If so, then my Medicare costs are effectively deductible (taken from pre-tax income, like the health insurance premiums that used to be taken from my paycheck) if deducted from Social Security, but not if paid directly like I'm doing now (since like most people, I will now be taking the higher standard deduction and no long itemizing). ...............................................................

Does seem a bit unfair that some working folks get that benefit for medical
insurance premiums and geezers don't. For HSAs you can have contributions "deducted" pre-tax or have it "adjusted" after-tax but not so w/ the medical insurance. I guess nobody said life was fair or consistent.

 

[donheff]

I reacted the same way as OP when I read my federal retirement annuity statement. The gross and net amounts appeared to include the deduction for health benefits. But alas. that is not the case. Health insurance deductions for retirees are not pretax. The difference in gross and net merely reflects the return of taxed contributions I made while working.

 

[Dtail]

I'm curious where you read that, because it certainly is not true.

+1 for sure. My DGF is already in this situation for tax purposes.

 

[Crabby Mike]

Thanks all - I knew I'd get the straight scoop here. Obviously I haven't seen a completed SSA 1099 yet, so I looked at it on irs.gov and misinterpreted the instructions. Oh well.