From 24/7 Wall St. · Gerelyn Terzo · · 1m 20s
Reverse Mortgage Avoids Medicare Surcharge
Retirees using reverse mortgages avoid Medicare premium hikes while neighbors selling homes face tax-driven cost increases.
In brief
Retirees using reverse mortgages avoid Medicare premium hikes while neighbors selling homes face tax-driven cost increases. A reverse mortgage pays $3,000 monthly without increasing Medicare premiums, unlike taxable home sales that could raise premiums two years later. Originally reported by 24/7 Wall St..
Reverse Mortgage Pays $3,000 Monthly
A retiree receives $3,000 monthly from her home without selling it.
Medicare Never Sees Reverse Mortgage Funds
The IRS treats reverse mortgage payments as loan advances, so Medicare doesn't count them as income.
Neighbor's Home Sale Creates Taxable Gain
The neighbor sells his house and faces a taxable gain that could raise Medicare premiums two years later.
Taxable Gain Calculation
Taxable gain is calculated by subtracting selling costs and adjusted basis from the sale price.
Home Sale Exclusion Applies
Homeowners can exclude up to $250,000 of gain or $500,000 for married couples filing jointly.
Two-Year Lookback Period
A home sale in 2026 affects Medicare premiums for 2028 due to a two-year tax lookback.
Reverse Mortgage Avoids Tax Loop
Reverse mortgage cash doesn't trigger the tax loop that increases Medicare premiums through repeated withdrawals.
Tax Planning Tips
Track home improvements and move sales to different tax years to minimize Medicare impact.
The big picture
A reverse mortgage pays $3,000 monthly without increasing Medicare premiums, unlike taxable home sales that could raise premiums two years later.
