Tax Talk – The Hidden Healthcare Tax

October 18, 2023

Tax Talk – The Hidden Healthcare Tax: Fall is a season many of us eagerly anticipate. With the changing leaves, cooler temperatures, and the return of football, it’s a beautiful and vibrant time of the year. For families, it’s an opportunity to engage in seasonal traditions, like raking up those big piles of leaves. The children delight in jumping into the leafy mounds, sometimes even hiding and playfully startling the family pets – a time of pure, unadulterated fun.

 

 

As the fall season unfolds, changes are also happening in the world of healthcare. We recently discussed these shifts during our Friday focus on healthcare, recognizing that this is the season when we learn about upcoming premium changes for Medicare, supplement plans, and the health insurance marketplace. However, there’s one aspect that often remains hidden from view but can significantly impact your financial health – the Medicare Part B premium based on your income.

Most individuals qualify for Medicare Part A with no cost, thanks to the credits they’ve accumulated during their working years. This is usually the case for anyone who has worked for at least 10 years in the United States. Then there’s Medicare Part B, which comes with a premium. The premium amount tends to change each year, and it’s projected to increase from $169 to $170 for the next year.
What’s not immediately evident to everyone is that the Medicare Part B premium is income-dependent. If your individual income exceeds $97,000 or your household income exceeds $194,000 in 2024, your Medicare Part B premiums will increase.

The higher your income, the more you’ll pay, with multiple tiers of premium increases.

The impact of these income-based premium adjustments might not be immediately obvious, but they have far-reaching implications. For instance, consider the rising popularity of Roth conversions in recent years. While Roth conversions can be advantageous in terms of lifetime tax savings, converting a substantial amount in a single year could push your Medicare premiums higher. These higher premiums can persist for a couple of years because they are based on your income from the previous year.
It’s essential to realize that seemingly unrelated financial moves, such as selling property or receiving a substantial work bonus, can also affect your Medicare premiums. Sometimes you can take steps to mitigate these effects, while other times, you have limited control over the situation.
Many individuals don’t fully grasp the connection between government-sponsored health insurance and taxes. Your income, as reported on your tax returns, is used to determine your premiums for programs like Medicare and marketplace insurance. Attempting to underreport your income may lead to lower premiums initially, but you’ll be required to repay any subsidies received when your true income is reconciled with your tax returns.

Therefore, it’s vital to understand how these hidden taxes and income levels affect your health insurance.

Similarly, when it comes to health insurance, ignorance about hidden taxes and income thresholds can lead to unexpected financial burdens, such as higher premiums.

Whether you’re embracing the fall season or navigating the complexities of health insurance, awareness is key. Every financial decision you make has repercussions, and it’s crucial to comprehend how they may impact your taxes and potential additional premiums on your health insurance.

If you have any questions or need guidance on making informed financial decisions, don’t hesitate to reach out. Your financial wellbeing is our top priority.

Tax Talk – The Hidden Healthcare Tax: If you have more questions and would like to schedule a personal one-on-one call with Michelle, click HERE to access Michelle’s calendar and schedule a day and time that is convenient for you.

We serve clients in Mineral Point WI, Dodgeville WI, Platteville WI, Lancaster WI, Fennimore WI, Boscobel WI, Richland Center WI, Muscoda WI, Spring Green WI, Mazomanie WI, Sauk City WI, Middleton WI, Madison WI, Fitchburg WI, Verona WI, Mount Horeb WI, Barneveld WI, New Glarus WI, Monroe WI, Belleville WI, Oregon WI, Stoughton WI, Darlington WI, Cuba City WI, Hazel Green WI, Belmont WI, Dubuque IA, Freeport IL

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