Does My Appeal Have Any Merit?

Category: 
Dec 14 2019 - 1:55pm

I was stunned to find out that SSA will surcharge Medicare payments for all capital gains on the sale of your primary home.(1/3 of a 2 family in my case) Thankfully for one calendar year only. I was at FRA in 2018, the year I sold my house, but delayed claim until the end of of 2019 for the increased benifit. I was notified of the surcharge shortly after my claim. I filed an appeal:
1-based on that it was , partially (1/3) my primary residence for 20 years, and I have no intention of buying another house again.
And 2- that I am PERMANENTLY retired, I have not worked since the end of 2017, have let my professional licences expire for health reasons and have only volunteered as a teacher of english as a second language and animal welfare projects since, and have no intention of returning to the workforce. As will show on my 2019 return and going forward. They look back only 2 (3?)years of returns, and may back adjust -?- based on my future returns. Will they? Should I have waited another year or 2? is there any legal strategy to avoid/minimize this penalty?
Does my appeal have any merit?
Surely others have stepped on this landmine and everyone else should be AWARE. Too late for me, Im financially ok, a good forum to educate others, thank you!,
...but, OUCH!

Hi,

The fact that the spike in your income resulted from capital gains on the sale of a primary residence won't help you to avoid an increased Medicare premium rate, but the fact that you've retired might. Medicare premium rates are set based on a sliding scale determined by your annual modified adjusted gross income (MAGI) level (https://www.cms.gov/newsroom/fact-sheets/2020-medicare-parts-b-premiums-...). The MAGI level used to determine your premium rate is typically based on your tax return for the year 2 years prior to the year that the premium rate applies. So, for example, your 2020 premium rate would normally be based on your MAGI for the 2018 tax year.

However, there is a provision that allows Social Security to use a different more recent tax year on which to base a person's Medicare premium rate, but only if a specified 'life changing event' (LCE) is involved. LCEs are defined as any of the following circumstances (https://secure.ssa.gov/apps10/poms.nsf/lnx/0601120005#c):
1. Death of spouse;
2. Marriage;
3. Divorce or annulment;
4. Work reduction;
5. Work stoppage;
6. Loss of income-producing property;
7. Loss of employer pension; or
8. Receipt of settlement payment from a current or former employer.

My expertise is limited to Social Security benefits, and I don't pretend to be an expert on Medicare. Therefore, I can't tell you whether or not your particular set of circumstances meets the definition of an LCE. In any case, though, Medicare premiums are reevaluated every calendar year. So, if you do end up paying higher Medicare premiums in 2020 due to your 2018 income, your premium rate should automatically be reduced in subsequent years if your MAGIs starting in 2019 drop below the specified limits.

Best, Jerry