Increased Medicare Deduction on 2010 Social Security

[SFBOB]

With the decline of the stock market during the fall months of 2008 my client sold an annunities resulting in an incresed AGI of $100,000.00.The result was a Medicare cost adjustment of $110.50 per month, plus $110.50 penalty for the high income. Total result was $221.00 monthly deduction in the original $1089.00 monthly S/S. Client is single and AGI range is as follows:

$85,000.01 TO $107,000.00 Adjust $44.20

$107,000.01 TO $160,000.00 " $110.50

$160,000.01 TO $214,000.00 " $176.80

OVER $214,000.00 " $243.10

Clients normal taxable income is $10,000.00 plus non taxed $13,068.00 S/S

MFJ and MFS is a different adjustment.

When your client calls, tell them that the reason is detailed in the letter they received from S/S [That is if they read it and saved it]

As a general point of information; the client sold the annunities because she found that the insurance company had 85% of her policy value invested in the stock market on a fast train headed south in 2008.

Have a great Holiday Regards Bob

[TAXBILLY]

Their premium should go down the following year. I would advise the client to be sure that happens.

see www.irs.gov for information.

taxbilly

[SFBOB]

Yes the comments in the S/S letter refers to one time home sales and other large income spikes. Will adjust down in 2011. Just wanted to share this with other ATXer's

[JohnH]

I sympsathize with taxpayers who get hit with this premium jump when there's a one-time increase in their income in a given year. I also have one client who has been hit with it from the inception and probably always will be. I'm a compassionate sort of guy for the most part, but in this case I'm a little more heartless - my answer to them is "Be grateful you have the income."

[Gail in Virginia]

If it is a continuing thing, I don't have a lot of sympathy either but we had a client that had to sell his family farm to pay for the round-the-clock help he needed to be able to stay at home. This one time event caused his medicare premiums to jump, and he really couldn't afford it - he need the money to pay the sitters. But the law is the law - nothing could be done.