Ask The Advisor: May 2015

Ask The Advisor: May 2015

Would Selling A Home Affect Our Social Security?

Q: My wife is 65 and I’m 66. Both of us have started Social Security. We have an opportunity to sell our home, and would realize about $180,000 gain. Would this affect what we receive in Social Security? How about taxes?

A: The good news is that the sale of your home, or real estate that you hold as an investment (like a vacation home or rental property), won’t reduce your Social Security benefits. Social Security earnings restrictions rules only kick in when income is received as wages and earnings from jobs.

But while your Social Security benefits won’t be reduced by capital gains, your benefits will be subject to taxation. Your gain is also likely to mean you and your wife will pay higher Medicare Part B and Part D premiums in 2016, and that can take a sizable bite out of your budget.

If you are selling a home that’s your primary residence, individuals are allowed to exclude up to $250,000 in capital gain and married couples $500,000 if filing jointly. To qualify, you must live in your principal residence for at least two out of the five years before you sell it. But this tax break doesn’t apply to a vacation home or other property. In that case the more usual capital gains rules would apply.

Up to 85% of your Social Security benefits may be taxable when the “provisional income” of you and your spouse is more than $44,000. To determine if benefits are taxable, you first must take one half of Social Security benefits, plus all other income like taxable pensions, wages, interest, dividends and other income. Social Security recipients must also include any tax-exempt interest income (like interest on municipal bonds), plus any exclusions from income.

The income shown on the return you file for 2014 this tax season will be used to determine what you pay for your Part B and Part D coverage in 2016. Beneficiaries with higher incomes pay higher premiums for Part B and a surcharge for Part D coverage.

In 2015, for example, joint tax filers with incomes above $170,000 and up to $214,000 pay $146.90 per month per person for Part B premiums instead of the base $104.90 per month. Next year the amount is likely to be somewhat higher when the new Part B premium is announced. In addition to your normal Part D plan premium you will pay a premium surcharge. In 2015 people with the above income pay a surcharge of $12.30 per month, per person.

These higher premium costs would add more than $1,303 based on 2015 costs. We recommend that you budget at least an extra $1,500 for higher Part B and Part D costs in 2016, and that does not include anything for increases in your Medicare supplement premium or Part D plan premium. If your income is higher, you could pay even more. To help keep your Part D costs low, take time to compare and shop for a better drug plan during the Medicare Open Enrollment Period this October 15 through December 7th.

For more complete information on Medicare costs based on income, visit or check the 2015 issue of “Medicare and You,” CMS Product No. 10050. Charts showing what higher income beneficiaries pay in 2015 are listed on pages 33 for Part B, and 101 for Part D. Download a copy online or call 1-800-MEDICARE (1-800-633-4227) to order.

Most importantly please remember that the information you read here is not legal or tax advice, but was summarized from other financial sources. Consult your own attorney or tax professionals before making any decision!


Sources: “Capital Gains And Your Home Sale,” Kay Bell,, February 5, 2015,