December 23, 2020 | Posted in:

Filing Taxes and Medicare Premiums, Status does Matter!

Did you know that Medicare premiums are calculated based on the Modified Adjusted Gross Income (MAGI) of your prior year’s tax return? Did you know that you and your spouse pay the same for Medicare premiums when filing a Married Filing Jointly return? But why should Medicare be allowed to count a couple’s total income to determine each spouse’s individual premium? Why aren’t their incomes considered separately for purposes of their individual Medicare premiums?

Couples who file married filing separately each pay a premium to Medicare based on their individual income. Married filing separately is the most dreaded tax filing status and now it’s even worse when you are at the age of collecting social security and getting on Medicare.

In addition to forfeiting a variety of tax credits and deductions, people who pay taxes as married filing separately are subject to much less generous tax brackets. For example, on their 2019 tax returns, single taxpayers pay 37% — the highest rate — on income of $510,301 or more. Married couples filing jointly pay 37% on income of $612,351 or more. People who are married filing separately hit the 37% tax bracket when their income reaches $306,176.

Medicare surcharges for higher-income taxpayers filing separately are also higher. True, a person who is married filing separately with 2018 income of $87,000 or less pays the same 2020 Medicare Part B premium as a single taxpayer with the same income: $144.60 a month. But if his or her 2018 income was over $87,000, that premium leaps to $462.70 a month. Joint filers don’t pay $462.70 a month until their combined income surpasses $326,000.

And a taxpayer who is married filing separately with 2018 income of $413,000 or more pays $491.60 a month for Part B this year. Joint filers don’t pay that much unless their combined income was $750,000 or more.

Long story short, when filing your taxes make sure you discuss your Medicare premiums with your tax preparer. Taxpayers who are married and file taxes separately are subject to higher Medicare surcharges than married couples who file jointly. You don’t want to save a couple hundred dollars filing separately when the consequences to your Medicare premium can be devastating.


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