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DH turned 65 in 2017 and I signed him up for Medicare. I turned 65 in 2018 and I signed up for Medicare.

Being new to Medicare, I didn't know that there is a "high income" bump-up for Medicare premiums (in our case, "deductions" from Social Security).*

In 2017, Congress passed a new tax law which reduced tax rates on the middle class. This is temporary and will be reconsidered in 5 years (2022). I figure that deficits will be skyrocketing so the tax rates will probably be increased to the original brackets, if not more.

So I decided to use this temporary lower tax rate window to take distributions out of my Traditional IRA, pay the tax at current rates, and roll the money into my Roth IRA.

The problem is that I took out enough in 2018 that our income was higher than the "high income" Medicare bracket. Most of our "high income" was the IRA lump-sum distribution reported on a 1099R. As soon as I learned about the Medicare high-income bracket I wanted to re-characterize the Roth IRA back to the Traditional IRA. This was allowed in previous years but the 2017 law disallows this. So I'm stuck with one high-income year.

https://www.ssa.gov/pubs/EN-05-10536.pdf


To determine if you’ll pay higher premiums, Social Security uses the most recent federal tax return the IRS provides to us. If you must pay higher premiums, we use a sliding scale to make the adjustments, based on your modified adjusted gross income (MAGI). Your MAGI is your total adjusted gross income and tax-exempt interest income.If you file your taxes as “married, filing jointly” and your MAGI is greater than $170,000, you’ll pay higher premiums for your Part B and Medicare prescription drug coverage.


In 2019, I made another distribution from my Traditional IRA but was careful to keep the amount under the Medicare high-income level.

I just received a letter from the Social Security Administration saying that my Medicare Part B premium will be increased $70 per month based on our 2018 income tax return. I'm sure that we will soon receive an identical increase for DH. My mistake is going to cost us an additional $1,680 in 2020.

The Medicare information says:

What if my income has gone down?

If your income has gone down due to any of the following situations, and the change makes a difference in the income level we consider, contact us to explain that you have new information and may need a new decision about your income-related monthly adjustment amount:
• You married, divorced, or became widowed;
• You or your spouse stopped working or reduced your work hours;
• You or your spouse lost income-producing property because of a disaster or other event beyond your control;
• You or your spouse experienced a scheduled cessation, termination, or reorganization of an employer’s pension plan; or
• You or your spouse received a settlement from an employer or former employer because of the employer’s closure, bankruptcy, or reorganization.

If any of the above applies to you, we need to see documentation verifying the event and the reduction in your income. The documentation you provide should relate to the event and may include a death certificate, a letter from your employer about your retirement, or something similar.

If you filed a federal income tax return for the year in question, you need to show us your signed copy of the return. Use Form SSA-44 Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event to report a major life-changing event.

If your income has gone down, you may also use Form SSA-44 to request a reduction in your income-related monthly adjustment amount. You can find Form SSA-44 online at www.socialsecurity.gov/forms/ssa-44.pdf.
[end quote]

I have questions about this.
1. Since the Traditional IRA distribution does not fit into any of the above categories, is there any way to reverse increase in the Medicare deduction in 2020 (which is based on the high-income year of 2018)? Income reported on a 1099-R is added to Total Income along with other ordinary income (e.g. interest, etc.) and is not broken out separately.

2. Will the Medicare deductions decrease automatically in 2021 due to lower income in 2019 or will Medicare maintain the higher deductions (based on 2018) indefinitely?

I would appreciate guidance on how to address this.
Thanks,
Wendy

*We chose to receive Social Security now since neither of us expects to live long enough to break even if we start receiving Social Security at a later age.
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