December is the time for year-end tax planning, which leaves many people forgetting to plan to lower their Medicare premiums. To be real, most people probably have no idea that they can even proactively plan ahead to lower their Medicare premiums. If you are still making a good income, whether through working or investments, now is a great time to determine if some proactive tax planning to lower your 2020 income will also help you decrease your premiums for Medicare.
For those of you who don’t know, your Medicare premiums are based on your income. The formula for Medicare premiums contains cliffs, leading to dramatically higher premiums if you make just one extra dollar in a given tax year. Similarly, some adjustments for inflation for 2021 can further complicate planning for your Medicare premiums.
Is It Worth the Effort to Lower Your Medicare Premiums?
Yes, it is worth putting in the effort to lower your Medicare premiums. In some cases, reducing your income by just one dollar could slash your Medicare premiums by 40%, per year. If you are married, the surcharge will apply to both spouses regardless of their individual incomes.