September 18, 2023
The U.S. tax code contains some infrequently discussed provisions that could affect the taxes that retirees pay to support the Medicare program. These taxes apply in addition to the premiums Medicare recipients pay for coverage. The premiums for coverage function as a “hidden” tax, because they are imposed on a progressive income scale, but they are not classified as an income tax by the government.
https://www.ssa.gov/benefits/medicare/medicare-premiums.html
The actual taxes that support Medicare are reported on Forms 1040 and W-2. A person of retirement age will pay payroll (i.e., FICA) taxes on income earned from wages or self-employment. Even if an individual is not working during their retirement years, there is a separate 3.8% net investment income tax imposed on the investment earnings for high-income taxpayers. Retirees need to take these taxes into account when determining their effective marginal income tax rate. A review of the legislative history of these taxes will show the connection to the Medicare program.
Fulcrum Wealth Advisors will help clients minimize these taxes by reviewing their income and investment assets as part of the retirement planning process. The following articles provide an overview of the topic.
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nvestment advisor representative of securities and investment advisory services offered through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer, and Registered Investment Advisor. Cetera is under separate ownership from any other named entity. In addition, some Investment advisory services are offered through Fulcrum Wealth Advisors, LLC. Fulcrum Wealth Advisors, LLC is a registered investment advisor in the State of Washington.
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