Selling your home after 63 can be a punishable mistake by Medicare. Why it could cost you thousands in extra premiums
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For many retirees, selling their home is one of the biggest financial problems they’ll face outside of work — especially if they’ve owned it for decades, given the rapid rise in home prices.
According to the Joint Center for Housing Studies (JCHS) at Harvard University – which used data from the 2022 Survey of Consumer Finances – the average home equity for homeowners age 65 and older was $250,000 that year (1). As a result, selling the family home can feel like cashing in on a lottery ticket.
However, the transaction may also result in a hidden Medicare trap that increases your premiums. Without proper planning, you can pay thousands of dollars in unnecessary health care costs.
Here’s what older American homeowners need to know before pulling the trigger.
Medicare is a complex system with many moving parts, but in this example it is important to focus on the Income Related Monthly Adjustment (IRMAA) amount.
IRMAA is an additional payment that can increase your Medicare Part B and Medicare Part D premiums if your income is above a certain threshold. In 2026, the limit is $218,000 for a married couple filing jointly and $109,000 for a single (2) person.
Basically, IRMAA is calculated based on your Family’s Adjusted Adjusted Income (MAGI). They often include capital gains, meaning the net profit on the sale of the home can push your income over the limit, according to AARP (3).
So if you bought your home for $200,000 in the 1990s and sell it for $800,000 today, the resulting capital gain may put you over IRMAA limits and trigger premiums.
Depending on the size of your MAGI, your monthly premiums can go from as high as $202.90 to as much as $689.90 under the top IRMAA category, according to the Medicare Rights Center (4).
Selling your home right before you qualify for Medicare is not the answer. The Social Security Administration (SSA) typically uses income from the two previous years to determine your current MAGI, meaning your 2026 premiums are determined by the income you earned in 2024 (2).
In fact, this charge becomes a consideration if you sell your home at any time after you turn 63.
Given that a 65-year-old is estimated to spend about $172,500 on health care-related expenses during retirement, any additional premiums or additional payments can reasonably disrupt financial plans. Fortunately, there are ways to avoid this problem.
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Perhaps the best way to avoid such an unfortunate situation is to carefully manage the timing of your property’s sale.
If the home you wish to sell is your primary residence and you have lived in it for at least two of the last five years, you may qualify for an exemption without capital gains. The Internal Revenue Service allows you to deduct up to $250,000 of capital gains if you’re single and up to $500,000 if you’re married filing jointly (5).
Remember that this exemption only applies to capital gains, not capital gains. Other home improvements, selling costs and other closing costs can be added to your cost basis, potentially reducing your taxable income (6).
American adults typically spend about 25% of their total expenses on housing costs, according to data from the National Council on Aging (7).
If you are also burdened with housing costs, downsizing may be beneficial. If you’re under 63 and thinking about downsizing, selling early can help you avoid IRMAA altogether. If you are older, aging in place may reduce the risk of causing higher premiums.
A financial advisor can help you crunch the numbers so that the sale doesn’t bring in too much tax.
This is where platforms like Advisor.com come into play. You can find FINRA/SEC-registered certified professionals near you for free through the platform.
Just answer a few quick questions about your finances and future goals and the team will match you with the professional best suited to your needs.
Since all the advisors on their list are honest people, they are legally required to act in your best interest.
Set up a free consultation today to find what’s right for you.
Finally, if you sell a high-value property or a portfolio of rental properties after age 63, triggering an IRMAA charge may be unavoidable. You can consider this a one-time payment, especially if your income is normalized in the years after the sale.
However, understanding this potential pitfall can make it easier to plan ahead and avoid the unexpected.
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We rely only on vetted sources and reliable third-party reporting. For details, see editorial ethics and guidelines.
Joint Center for Housing Studies at Harvard University (1); Public Security Administration (2); AARP (3); Medicare Interactive by Medicare Rights Center (4); IRS (5), (6); National Council of Elders (7)
This article provides information only and should not be construed as advice. Offered without warranty of any kind.
