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PERSONAL FINANCIAL PLANNING
Planning for the Medicare
Part B premium
Editor: Have you had an experience like this? Medicare tax on the additional
Theodore J. Sarenski, CPA/PFS A client just called, exasperated, $25,000 of income.”
saying: “My monthly Social Security Client: “Thanks for the clarifica-
Authors: check went down again. Last year tion. How can I avoid this in the
Nathan Oestreich, CPA (ret. Texas), [2022], it went down by $170.10 each future?”
Ph.D. month; for 2023, my monthly check Practitioner: “If you do not have
Michael S. Keane, CPA was reduced by $329.70. How could large taxable retirement withdrawals
John Cooper, CPA, DBA this be? When we spoke last year, you in a single year in the future, we can
explained that every person covered estimate your income and make sure
by Medicare Part B is subject to the you do not suffer from these large
Medicare Part B premium and the income-related adjustments to your
Financial advisers can standard premium for 2023 is $164.90. Medicare Part B premiums. Perhaps
But this is double that amount!”
we can engage in other planning, like
help clients avoid big Practitioner (you): “The premium taking the withdrawals in alternate
spikes in Medicare is simply deducted from the monthly years, potentially avoiding substantial
required minimum distributions in a
Social Security benefit, so your benefit
premiums through didn’t decline; they just withheld more few years. I understand $1,978 is not a
careful tax planning. for the Medicare Part B premium. I trivial amount for you.”
explained that last year.” What should a practitioner who
Client: “Yes, I understood. How- is advising clients know? Should the
ever, the reduction is twice what we practitioner-accountant at least know
discussed.” and understand what questions the
Practitioner: “Remember the ad- client should ask their financial plan-
ditional $25,000 in income you had ner? Is this an important practice
when you liquidated a 401(k) in 2021? opportunity to provide additional
Your 2023 Part B premium is based benefits for our clients?
on your 2021 income. The $25,000
caused your modified adjusted gross Introduction
income to move from the lowest level Since Medicare Part B premiums
to the third level, which increased your are usually withheld from a person’s
premium for 2023 from $164.90 to monthly Social Security payments,
$329.70. Congratulations, 2021 was a beneficiaries of Medicare coverage
good income year. Not only did that may not be aware of the existence or
liquidation drive you into a higher in- the amount of their mandatory pre-
come tax bracket, but it also increased miums, which can range widely based
your Part B premium by $164.80 per on their income, and how they might
month, or $1,978 for the year. In your plan. Planning is complicated by the
case, that is about an 8% phantom fact that the amount of the premium
46 March 2023 The Tax Adviser
