Background Prior to 2010, self-employed individuals were not allowed to take an above the line self-employed health insurance deduction under Section 162(l) for Medicare premiums. Health insurance is only considered deductible under the statute if it is established by your trade or business. The purpose of the health insurance deduction is to equalize the treatment of owners of corporations who are allowed to exclude health care benefits as a fringe benefit and self employed individuals who cannot. Since Medicare is established by the Federal government the IRS did not consider Medicare premiums deductible as self employed health insurance. Recently the IRS reversed their opinion on the matter referencing Notice 2008-1. Notice 2008-1 states that as long as the self employed individual’s business ultimately pays for the health insurance and follows certain reporting requirements, the health insurance premium payments are deductible as above the line for the self employed individual. The Office of Chief Counsel IRS Memorandum extended Notice 2008-1 to apply to self employed individuals who pay Medicare premiums. Now all Medicare premium parts-A, B, C and D-paid by the self-employed individual for themselves, their spouse and dependents are deductible as self employed health insurance. The premium payments need not be paid directly by the self-employed individual. For example, the S corporation of a more-than-2% shareholder can make the payments directly and the self-employed individual is entitled to the deduction.
Video: SHIIP Medicare Premiums.flv
2010 Roth Conversion Might Spell Higher Medicare Premiums
This year, the IRS will generally provide tax returns from the year 2010 for the SSA to review the modified adjusted gross income. As you might recall, 2010 was the big year for converting traditional individual retirement accounts (IRAs) into Roth IRAs. If you participated in this conversion tactic, you might have seen an increase in your Medicare premium this year. If you spread your conversion income with the deal provided by the IRS over the tax years of 2011 and 2012, you might see an increase in your premium in 2013 and 2014. However, keep in mind these increases are only temporary. Once your income returns to its previous level, your Medicare premiums will be readjusted. For a closer look into what your Medicare premiums might be, click on the Medicare booklet.
Study Finds Premium Support Plan Could Raise Medicare Premiums In Many Parts of Country
The study modeled the impact of a generic version of premium support, under which beneficiaries would receive a defined subsidy, or voucher, to buy health insurance in a competitive market instead of getting a guaranteed set of benefits, as Medicare has traditionally provided. That payment would be tied to the second-lowest-cost plan offered in an area or traditional Medicare, whichever is lower. This kind of a change is a central part of the House Republican budget written by Rep. Paul Ryan of Wisconsin, now the GOP’s vice-presidential candidate, and it has also been embraced by GOP presidential nominee Mitt Romney. Even a few Democrats have flirted with such a plan as a way to leverage market efficiency to rein in the spiraling cost of Medicare.
Transforming Medicare into a Premium Support System: Implications for Beneficiary Premiums
The analysis does not attempt to model any specific proposal, but is generally based on an approach included in House Budget Chairman Paul Ryan’s fiscal year 2013 budget plan, the proposal Chairman Ryan co-sponsored with Senator Ron Wyden of Oregon, and; in the plan put forward by former Senator Pete Domenici and Dr. Alice Rivlin. In the first two proposals, people who are at least 55 years old, including current beneficiaries, would be exempt from the new system. Republican presidential nominee Gov. Mitt Romney has supported a premium-support system along these lines.
Newsroom – Blue Cross Blue Shield of Michigan broadens Medicare options with new Medicare Advantage PPO product
October 1 is the first day BCBSM and Medicare Advantage carriers across the nation can market their Medicare Advantage products for 2010. Beneficiaries in BCBSM Medicare Advantage products will receive letters in the next 10 days about the new product line-up. "Blue Cross remains fully committed to providing products to Medicare beneficiaries and will continue to have the broadest array of Medicare Advantage products in the state," said Mark Owen, BCBSM vice president for federal and individual business. "It’s important for Medicare beneficiaries to know that there is no immediate change to their coverage. They have until the end of the year to make their selection for 2010." In addition to the three BCBSM products for 2010, seniors also can select from three Medicare Advantage products offered by Blue Care Network, the BCBSM-affiliated HMO. "We will be working with insurance agents and other groups across the state to reach out to Medicare beneficiaries to help them navigate these product and premium changes," said Owen. Seniors who meet low income guidelines can receive subsidies from the state and/or federal government to pay for all or part of their premiums. Medicare Advantage premiums vary by product and region. The new PPO product is expected to provide beneficiaries with value for their premium. For example, the BCBSM Medicare Plus Blue PPO, which includes Part D prescription drug coverage, will cost between $61 and $141 a month (premiums vary by geographic region), while traditional BCBSM Medicare Supplemental (Medigap) Plan C plans cost $183 when combined with a stand-alone Part D BCBSM prescription drug program. Medicare Advantage plans offer Medicare benefits through private health insurance plans and most include Part D prescription drug coverage. When you purchase a Medicare Advantage plan, you do not need to also purchase a Medigap policy. Medicare Advantage plans are regulated solely by the federal government, while Medigap plans are regulated by the state. The announced product changes are only for Medicare beneficiaries who directly purchase their Medicare Advantage products, not for beneficiaries enrolled in a group plan. Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association.
An Unexpected Result From Roth Conversion
In case you hadn’t already noticed, this blog doesn’t have much to do with ducks – or any waterfowl for that matter. No, what we’re doing here is talking about all things financial; getting your financial house in order. Here in the Midwest, “getting your ducks in a row” implies organization, which is one of the outcomes of having a better understanding of your financial life. I hope you find the answers you’re looking for among the articles here, and perhaps a smile. If you can’t locate your answer, drop me an email or give me a call – we’ll see what we can find for you. And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.
Remember Your 2010 Conversion to a ROTH IRA?? That Conversion May Hurt For 2013 Medicare B
It may have made good sense to Convert your TIRA to a ROTH IRA in 2010, you could spread the income tax bite over 2 years, 2011 and 2012. So you made your first income tax payment earlier this year when you filed your2011 tax return, and now you are preparing to pay the last half of that tax bill when you file your 1040 for 2012. But you have already received a big surprise, your Medicare B premium for 2013 DOUBLED from what the premium was in recent years. Since 2004, Medicare Premiums have been partly determined based on income. Those in the higher income brackets get to pay more for their Medicare B premiums. The modified adjusted gross income (magi) from your tax return will impact your Medicare B premium 2 years later. So from your 2011 tax return your modified adjusted gross income may impact your Medicare B premium starting in January 2013. The good news is that this increase cost for Medicare B is on a year by year basis. When the taxpayer’s modified adjusted gross income exceeds $170,000 (married filing jointly) the Medicare B premium will be increased. There is a graduated scale that will increase their Medicare B costs. Let’s suppose this married couple typically has an AGI of $70,000. Their Medicare premium has been less than $100 per month for each of member of the couple. In 2010 they converted TIRA funds to a ROTH IRA in the amount of $400,000. Half of this income was reported on their 2011 tax return increasing their AGI to $280,000. This increase would set their Medicare premium for 2013 at $209.80 for each of them. When they file their 2012 tax return reporting the second half of the 2010 ROTH Conversion, and have a similar AGI their 2014 Medicare B premium will be increased due to the taxpayer’s AGI. The Medicare B premium will be set in late 2013. The good news is if their 2013 is back below the threshold, the Medicare B premium will return to the amount payable by most Medicare beneficiaries. Here is the 2013 Medicare B premium table for MFJ tax payers with higher AGI: Modified AGI is: More than: But not over:………………………2013 Part B Premium $170,000…….. $214,000………………………….. $146.90 $214,000…….. $320,000………………………….. $209.80 $320,000…….. $428,000………………………….. $272.70 $428,000…….. No Limit……………………………. $335.70 You can learn more about Medicare B premiums and deductibles here: http://www.medicare.gov/your-medicar…at-glance.html