ROTH conversion without triggering spouse’s Medicare IRMAA
My wife is on Medicare, I have 5 more years. I did a ROTH conversion and almost triggered the IRMAA on her Medicare. Could we file our taxes separately while I speed up my conversions so we don’t trigger higher Medicare taxes? We’re getting close to the “ticking time bomb” of taxes Mr. Slott talks about. I also understand the 5 year rule does not apply to my conversion because I’m 60. Thanks
Permalink Submitted by David Mertz on Tue, 2023-03-28 19:35
If you file separately, only your wife’s AGI would be used to determine your wife’s Medicare IRMAA. First you would need to make sure that her AGI stays under the first tier threshold, otherwise her IRMAA would likely be no better than if you filed jointly. Next, you would want to compare your combined tax liability filing separately compared to filing jointly to see if the likely additional combined tax liability would be less than the IRMAA savings. It could end up that you would pay more in taxes than your wife would pay in IRMAA. The only way to really know would be to do simulated tax returns and make assumptions about what the IRMAA amounts and thresholds will be two years hence.
Permalink Submitted by Jo Ljungstrom on Wed, 2023-03-29 14:57
Thank you for your reply. I know I have to pay the taxes on the conversion, but if we could avoid the IRMAA on top of the taxes, that is a small help. I just want to get my conversions done before I hit Medicare.
Permalink Submitted by Steve Ellis on Wed, 2023-03-29 16:15
We do a lot of tax planning for clients and this is one of the main things to watch out for. Our experience has been that most of the time you will save more tax in the long run by doing Roth conversions now versus the extra you might pay for IRMAA. We warn clients not to be short-sighted in trying to save on IRMAA when they could be saving many thousands of dollars over the next several years by doing Roth conversions now. Our favorite tool we use to do the calculations is a software firm called Holistiplan. We highly recommend you check them out. They have saved us countless hours in doing tax planning for our clients.