Personal finance Q&A: What will my Medicare Part B premium be?

Robert Powell, Special to USA TODAY 6:46 a.m. EST January 6, 2015 7/18/2014 11:38:08 AM -- Swampscott, MA, U.S.A -- USA TODAY personal finance advice columnist, Robert Powell -- Photo by Josh T. Reynolds for USA WEEKEND ORG XMIT: JR 131396 USAW - personal 7/18/2014 [Via MerlinFTP Drop](Photo: Josh T. Reynolds, for USA WEEKEND) Q: I am 66 years old and normally in the 10% federal income tax bracket. Since taking Social Security, I have never earned enough money to have to pay any taxes on my Social Security. In 2014, I sold my only rental income property for a long-term capital gain of about $110,000. I know that I will not have to pay federal taxes on this long-term capital gain since I am in the 10% bracket. But, will I have to pay higher Medicare premiums on my Part B (I currently pay $104 per month)? And will this sale cause me to pay taxes on my Social Security benefits? In 2014, I will report less than $2,000 in interest, receive about $7,500 in Social Security, have a net loss of about $500 from rental real estate, and have about $110,000 in a long-term capital gain. Joyce Aldawood, Hoffman Estates, Ill. A: If modified adjusted gross income (MAGI) is greater than $85,000 as an individual or $170,000 as a couple, Medicare B premiums will increase in 2016 for income made in 2014, says Carolyn McClanahan, M.D., a certified financial planner with Life Planning Partners in Jacksonville, Fla. How much more you'll pay for your Medicare Part B premium in 2016 will depend on your MAGI. For example, if you filed an individual tax return and your yearly income in 2013 was greater than $85,000 up to $107,000, your Medicare Part B premium would be $146.90 per month in 2015. That's what most people — about 95% of Medicare beneficiaries — pay. But, if your income in 2013 was greater than $107,000 the Medicare Part B premium for 2015 could be anywhere from $146.90 to $335.70 per month. MAGI, FYI, is the total of your adjusted gross income and tax-exempt interest income. Read Medicare Premiums: Rules For Higher-Income Beneficiaries. The good news for you is that the amount you pay can change each year depending on your income. Also worth noting: If you have to pay a higher amount for your Part B premium and you disagree with Uncle Sam you can use this form to contact Social Security. Learn more about Medicare Part B premiums here. In addition, since your income will be above $34,000 as an individual or $44,000 as a couple, 85% of Social Security will be taxed on the 2014 tax return, says McClanahan. One additional comment: If you have taken depreciation on the rental property, part of the gain will be taxed as ordinary income as recapture of depreciation, not as capital gains. This will result in a significantly higher tax bill than what you may be expecting. So, consult a good accountant to be prepared for the outcome, says McClanahan. Robert Powell is editor of Retirement Weekly, contributes regularly to USA TODAY, The Wall Street Journal and MarketWatch and teaches at Boston University. Read or Share this story: http://usat.ly/1IkbyS9