Does Owning a Home Affect Medicare Benefits?

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Russell Noga
by Russell Noga | Updated January 20th, 2024

Owning a home doesn’t directly impact your eligibility or the extent of your Medicare benefits. However, significant financial events related to homeownership, such as profiting from a home sale, can affect your Medicare Part B and Part D premium costs.

This article cuts through the confusion and directly addresses the question, “does owning a home affect Medicare?” We will discuss how and when owning a home might indirectly affect Medicare costs, equipping you with essential knowledge to navigate potential changes.


Key Takeaways

  • Selling your home can lead to higher Medicare Part B and Part D premiums if the profit increases your taxable income above certain thresholds, potentially classifying you as a high-income earner subject to premium surcharges.
  • You can exclude up to $250,000 (or $500,000 for couples) of capital gains from selling your primary residence from taxable income, thus potentially reducing Medicare premiums, along with other strategies like Roth IRA conversions and charitable contributions.
  • Home equity is considered when assessing Medicaid eligibility, with different states having varying equity limits, but protection strategies like Lady Bird deeds can safeguard your home from Medicaid recovery efforts.



Understanding Medicare and Homeownership


Does Owning a Home Affect Medicare Benefits? Understanding Medicare and Homeownership


Medicare, a federal program providing healthcare coverage to individuals aged 65 and above, plays a fundamental role in the lives of many retirees. But did you know that the sale of your home, if it leads to a substantial profit, such as capital gains tax, could lead to an increase in your Medicare Part B or Part D premiums?

That’s right, homeownership can indirectly impact your Medicare benefits. Don’t worry just yet, we will unpack the fundamentals of Medicare coverage and how home equity can influence your premiums.


The Basics of Medicare Coverage

Medicare is comprised of several parts: Part A covers hospital and inpatient services, Part B covers outpatient and physician services, and Part D covers prescription drugs. If you’re a social security benefits recipient, you’re automatically enrolled in Medicare Part A and Part B.

Keep in mind, though, that not all services fall under Medicare coverage. Services such as:

  • vision care
  • hearing aids
  • dental work
  • overseas care
  • long-term care


are typically not covered by Medicare.


Home Equity’s Role in Medicare Premiums

Home equity can play a significant role in determining Medicare premiums. Selling your home can increase your taxable income, as the profit you make from the sale is considered as part of your income.

This increase in taxable income is taken into account when determining premiums for Medicare Part B and Part D.

The home equity thresholds that affect Medicare premiums are $103,000 for individuals and $206,000 for couples, based on income levels established in 2022. Therefore, if you’re contemplating selling your house, be mindful of these limits and how they could affect your Medicare premiums.


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Navigating Real Estate and Medicare Costs


Does Owning a Home Affect Medicare Benefits? Navigating Real Estate and Medicare Costs


Navigating the intricacies of real estate transactions coupled with Medicare costs can seem overwhelming. Did you know that the income you generate from selling your home can impact your Medicare premiums?

If you’re considered a high-income earner, meaning your Modified Adjusted Gross Income (MAGI) exceeds $170,000 per year for a couple, or $85,000 for a single individual, you might face premium surcharges. Yet, these premium surcharges typically aren’t instantly applied.

There’s usually a two-year delay between earning a substantial income and experiencing an impact on your Medicare premiums.


How Capital Gains from a Home Sale Can Affect Medicare Premiums

Capital gains from selling your home can contribute to your taxable income, potentially pushing you into the high-income earner category. If your MAGI surpasses the threshold of $85,000 for an individual or $170,000 for a couple filing jointly, high-income surcharges can be applied to your Medicare premiums.

This extra charge, called the Income Related Monthly Adjustment Amount (IRMAA), is figured out according to your gross income, including pension income, declared two years earlier. If your income has decreased since then, you can appeal the IRMAA determination with the Social Security Administration.


Exclusions and Reduction Strategies

But what if there were ways to reduce the impact of capital gains on your Medicare premiums? When an individual sells their primary residence, a portion of their capital gains may be excluded from taxable income.

This exclusion can reduce the income used to calculate Medicare Part B and Part D premiums.

You can exclude up to $250,000 of capital gains for individuals or up to $500,000 for couples when selling your primary residence, which is known as capital gains exclusions.

Other strategies to manage Medicare premiums include converting to Roth IRA accounts or participating in philanthropic endeavors for potential tax advantages.


Medicaid Eligibility and Your Home


Does Owning a Home Affect Medicare Benefits? Medicaid Eligibility and Your Home


Now, let’s switch focus and investigate the correlation between Medicaid eligibility and owning a home. Medicaid, another crucial federal program, provides health coverage to some low-income individuals, families, and children.

Did you know that Medicaid considers the equity interest in your home when assessing your eligibility?

If your spouse resides in the home, or if there’s a likelihood of returning home after receiving care, the value of the home may not be considered in determining eligibility, provided it doesn’t exceed specific limits. You can even use excess assets for home repairs, a permissible method to decrease countable assets and attain Medicaid eligibility.


The Interplay Between Medicaid and Home Assets

How then, do home assets factor into Medicaid eligibility? For Medicaid eligibility, the maximum amount of assets an individual can have is $2,000.00.

Non-countable assets, which are not considered when determining eligibility, include your primary residence, one vehicle, and personal belongings.

The equity limits on homes, however, vary by state. For instance, 37 out of 51 states adhere to the federal minimum of $636,000 for Medicaid eligibility in terms of home equity limits, but California does not impose any limit on home equity when considering Medicaid eligibility.


Protecting Your Home from Medicaid Recovery

Protecting your home from Medicaid recovery efforts is crucial, especially if a Medicaid recipient resides in it. The Medicaid program can impose a medicaid lien on a recipient’s property to recover the cost of long-term care services provided to medicaid recipients.

One way to protect your home from Medicaid recovery efforts is through a Lady Bird deed. A Lady Bird deed is a legal instrument that enables property owners to:

  • Transfer their property to a chosen beneficiary while maintaining ownership throughout their lifetime
  • Upon the owner’s demise, the property is transferred directly to the specified beneficiary
  • Circumvent any processes that could subject the asset to recovery by creditors or Medicaid.



Does Owning a Home Affect Medicare Benefits?

Retirement Planning: Balancing Medicare and Housing Needs


Does Owning a Home Affect Medicare Benefits? Retirement Planning: Balancing Medicare and Housing Needs


Retirement planning frequently entails balancing diverse financial requirements, including retirement benefits, Medicare benefits, and housing needs. Although Medicare furnishes health insurance coverage for retirees, it’s imperative to factor in your living situation and how to weave medical expenses into your financial blueprint.

When selecting a retirement living option, consider your current home maintenance capabilities, senior living requirements, and whether health and physical issues allow for independent living.

It’s also important to understand what Medicare covers in relation to skilled nursing facilities and long-term care hospitals, as it typically does not cover the costs of residing in an assisted living facility.


Assessing Your Living Situation in Light of Medicare Benefits

Assessing your present living conditions in view of your Medicare benefits can aid in maximizing your coverage and minimizing costs. For instance, your living situation can impact the amount of Medicare benefits you’re eligible to receive.

Higher-income beneficiaries may face increased monthly costs for Medicare Part B, and substandard housing conditions can exacerbate health issues, indirectly affecting Medicare benefits.

To enhance your living arrangements for improved Medicare coverage, consider:

  • Selecting suitable Medicare plans
  • Reconsidering benefit design to enhance medication adherence
  • Investigating Money-Saving Programs such as Medicare Savings Programs for seniors with limited income.



Incorporating Medical Expenses into Retirement Planning

Medical expenses can make a significant dent in your retirement savings if not adequately planned for. To incorporate these expenses into your retirement planning, consider:

  • Utilizing health savings accounts (HSAs)
  • Investing in long-term care insurance
  • Carefully considering Medicare enrollment
  • Managing your income to potentially reduce Medicare premiums.


In 2023, the premium amount is $164.90 per month and may vary based on income levels. To prepare for out-of-pocket medical expenses during retirement, consider the following strategies:

  • Maximize the use of an HSA (Health Savings Account)
  • Enroll in Medicare at the appropriate time
  • Lower your modified adjusted gross income
  • Plan for long-term care


These strategies can help you better manage your healthcare costs in retirement.


Special Considerations for Specific Groups

Now, let’s examine specific considerations for certain groups, like disabled beneficiaries and couples where one partner needs nursing home care. A Special Needs Trust (SNT), for example, is an essential tool that enables disabled Medicare beneficiaries to possess assets without impacting their benefit eligibility.

Conversely, when one partner needs nursing home care, it’s vital to account for the influence on Medicaid eligibility and the community spouse resource allowance, which can indirectly impact the asset computation for the spouse staying at home, Medicare coverage, and costs.


Disabled Beneficiaries and Special Needs Trusts

A Special Needs Trust (SNT) can:

  • Safeguard the beneficiary’s qualification for needs-based government benefits like Medicaid
  • Provide financial support for individuals with physical or mental disabilities or chronic illnesses
  • Not impact their SSI or Medicaid benefits


To establish a SNT, the following criteria must be met:

  • The individual must be under the age of 65
  • The individual must have a documented disability
  • The trust must be irrevocable
  • The trust must be arranged prior to the beneficiary reaching 65 years of age in order to preserve eligibility for public assistance programs.



When One Spouse Requires Nursing Home Care

When one partner needs nursing home care, it’s important to weigh the effect on Medicare and Medicaid benefits. For instance, Medicare Part A provides coverage for short-term stays in a Medicare-certified skilled nursing facility, but it doesn’t cover long-term care.

To preserve assets in this situation, you might consider:

  • Purchasing a Medicaid-Compliant Annuity
  • Creating a Life Estate for real estate
  • Establishing a Trust
  • Acquiring Medicaid-compliant annuities


However, be cautious about asset transfers, as they may result in a period of up to five years of ineligibility for Medicaid benefits for a Medicaid applicant.


In conclusion, understanding the relationship between Medicare, Medicaid, and homeownership is crucial when planning for retirement.

Not only can the sale of your home or other real estate transactions impact your Medicare premiums, but your home equity and assets also play a significant role in determining your Medicaid eligibility.

Various strategies, such as utilizing a Special Needs Trust or a Lady Bird deed, can help protect your assets and ensure adequate coverage and care.



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Frequently Asked Questions


  Can you have Medi-Cal if you own a house?

Yes, you can have Medi-Cal even if you own a house, as your primary residence is exempt and not counted towards your eligibility for Medi-Cal.


  What income is used to determine Medicare premiums?

Medicare premiums are determined using your Modified Adjusted Gross Income (MAGI), which is based on your most recent federal tax return provided by the IRS. This includes your total adjusted gross income and tax-exempt interest income.


  Does Medicare take from your estate?

Yes, Medicare can potentially take assets from your estate if there is a probate process in place for your estate. Be aware of this possibility when planning your estate.


  What is the role of a Special Needs Trust for disabled Medicare beneficiaries?

A Special Needs Trust can safeguard a disabled Medicare beneficiary’s qualification for needs-based government benefits like Medicaid and provide financial support for individuals with disabilities or chronic illnesses. It plays a crucial role in protecting their eligibility for essential assistance.


  What strategies can I employ to protect my assets if my spouse requires nursing home care?

To protect your assets when your spouse requires nursing home care, you can consider purchasing a Medicaid-Compliant Annuity, creating a Life Estate for real estate, establishing a Trust, and acquiring Medicaid-compliant annuities to preserve assets. These strategies can help safeguard your assets in such circumstances.


Find the Right Medicare Plan for You

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Call us today at 1-888-891-0229 and one of our knowledgeable, licensed insurance agents will be happy to help you!


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