Medicare health insurance premiums can add up to big bucks, especially if you’re married and both you and your spouse are paying. In this column, I’ll list the 2018 and 2019 premium amounts and explain when you can potentially claim tax deductions for them. Here goes.
Medicare Part A Premiums
Medicare Part A coverage is commonly called Medicare hospital insurance. It covers inpatient hospital care, skilled nursing facility care, and some home health care services. You don’t have to pay premiums for Part A coverage if you paid Medicare taxes for 40 or more quarters during your working years. In that case, you’re considered to have paid your Part A premiums via Medicare taxes on wages and/or self-employment income. However, some individuals did not pay Medicare taxes for enough months while working and must pay for Part A coverage.
* If you paid Medicare taxes for 30-39 quarters during your working years, the 2018 Part A premium was $237 per month ($2,844 for the full year). For 2019, the monthly premium is $240 ($2,880 for the full year).
* If you paid Medicare taxes for less than 30 quarters, the 2018 Part A premium was $422 per month ($5,064 for the full year). For 2019, the monthly premium is $437 ($5,244 for the full year).
* The same premiums apply to your spouse if he or she paid Medicare taxes for less than 40 quarters while working.
Medicare Part B Premiums
Medicare Part B coverage is commonly called Medicare medical insurance or Original Medicare. Part B mainly covers doctors and outpatient services, and Medicare-eligible individuals must pay monthly premiums for this benefit.
The monthly premium for the current year depends on your modified adjusted gross income (MAGI), as reported on your Form 1040 for two years earlier. Strange but true. For example, your 2019 premiums depend on your 2017 MAGI. MAGI means the adjusted gross income (AGI) amount shown on page 1 of your Form 1040 plus any tax-exempt interest income.
For 2018, most people paid the base Part B premium of $134 per month ($1,608 if premiums were paid for the full year).
For 2019, the base premium is $135.60 per month ($1,627 for the full year).
Higher-income individuals must pay a surcharge for Part B coverage on top of the base premium. See the section below.
Medicare Part D Premiums
Medicare Part D coverage is for private prescription drug coverage. Premiums vary depending on the plan. Higher-income individuals must pay a surcharge on top of the base premium. See the section near the bottom of this article.
Medigap Supplemental Coverage Premiums
Medicare Parts A and B do not pay for all health care expenses. Coverage gaps include copayments, coinsurance, and deductibles. So you may want to buy a so-called Medigap policy, which is private supplemental insurance that’s intended to cover some or all of the gaps. In most states, insurance companies can only sell standardized Medigap policies that offer the same basic benefits. Some Medigap policies offer additional benefits for an additional cost. Premiums vary depending on the plan you select.
Medicare Advantage (Medicare Part C) Premiums
You can get your Medicare benefits from the government through Part A and Part B coverage or through a so-called Medicare Advantage plan offered by a private insurance company. Medicare Advantage plans are sometimes called Medicare Part C.
The government pays the Medicare Advantage insurance company to cover your Medicare Part A and Part B benefits. Medicare Advantage plans may also include prescription drug coverage (Medicare Part D), and they may also provide dental and vision care benefits that are not covered by Medicare Part B.
When you enroll in a Medicare Advantage plan, you continue to pay Medicare Part B premiums. You will usually pay a separate additional monthly premium for the Medicare Advantage plan, but some plans do not charge any additional premium. The additional premium, if any, depends on the plan you select.
Key Point: Medigap policies do not work with Medicare Advantage plans. So if you join a Medicare Advantage plan, you should drop your Medigap coverage.
Tax deductions for Medicare health insurance premiums
Premiums for all of the aforementioned Medicare health insurance coverages can be combined with your other qualifying health care expenses for purposes of claiming an itemized deduction for medical expenses on your Form 1040. However for 2018, you can only claim an itemized medical expense deduction to the extent your total qualifying expenses exceed 7.5% of AGI. For 2019, the medical expense deduction threshold is scheduled to rise to a daunting 10% of AGI unless Congress extends the 7.5%-of-AGI deal.
Another factor: Because the Tax Cuts and Jobs Act greatly increased the standard deduction amounts for 2018-2025, fewer individuals will be itemizing. But having significant medical expenses (including those for Medicare health insurance premiums) may allow you to itemize and collect some tax savings.
For 2018, the standard deduction amounts are $12,000 for single filers, $24,000 for married joint-filing couples, and $18,000 for heads of households. For 2019, the standard deduction amounts are $12,200, $24,400, and $18,350, respectively.
Key Point: If you are self-employed or an S corporation shareholder-employee, you can claim an above-the-line deduction for your health insurance premiums — including Medicare premiums. And you don’t need to itemize to get the tax-savings.
Medicare Premium Surchages for Higher-Income Folks
2018 Part B Surcharges
Higher-income individuals must pay a surcharge in addition to the base premium for Part B coverage. For 2018, surcharges apply to singles with 2016 MAGI in excess of $85,000 and married joint-filing couples with 2016 MAGI in excess of $170,000. Including the surcharges (which go up as 2016 MAGI goes up), the 2018 Part B monthly premium for each covered person can be $187.50 ($2,250 for the full year), $267.90 ($3,215 for the full year), $348.30 ($4,180 for the full year), or $428.60 ($5,143 for the full year). The maximum $428.60 premium applies to singles with 2016 MAGI in excess of $160,000 and married individuals who filed 2016 joint returns with MAGI in excess of $320,000.
2019 Part B Surcharges
For 2019, the Part B surcharge depends on the MAGI amount from your 2017 Form 1040. Also, another MAGI category has been added to the surcharge structure for 2019. Surcharges apply to singles with 2017 MAGI in excess of $85,000 and married individuals who filed joint 2017 returns with MAGI in excess of $170,000. Including the surcharges (which go up as 2017 MAGI goes up), the 2019 Part B monthly premiums for each covered person can be $189.60 ($2,275 for the full year), $270.90 ($3,251 for the full year), $352.20 ($4,226 for the full year), $433.40 ($5,201 for the full year), or $460.50 ($5,526 for the full year) The maximum $460.50 premium applies to singles with 2017 MAGI in excess of $500,000 and married individuals who filed 2017 joint returns with MAGI in excess of $750,000.
2018 Part D Surcharges
For 2018 the Part D surcharge depends on your 2016 MAGI and the surcharge goes up using the same MAGI scale as the aforementioned Part B premium surcharge. The monthly surcharge amounts for each covered person can be $13.00, $33.60, $54.20, or $74.80. The maximum $74.80 surcharge applies to singles with 2016 MAGI in excess of $160,000 and married individuals who filed 2016 joint returns with MAGI in excess of $320,000.
2019 Part D Surcharges
For 2019 the Part D surcharges depend on your 2017 MAGI and they go up using the same MAGI scale as the Part B surcharges. The good news is the 2019 surcharges are slightly lower than for 2018, except for folks in the highest MAGI category. The 2019 monthly surcharge amounts for each covered person can be $12.40, $31.90, $51.40, $70.90, or $77.40. The maximum $77.40 surcharge applies to singles with 2017 MAGI in excess of $500,000 and married individuals who filed 2017 joint returns with MAGI in excess of $750,000.