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For many retirees, selling their home is one of the biggest financial windfalls they’ll get outside of work — especially if they’ve owned their home for decades, given the rapid rise in home prices.
According to data from the Joint Center for Housing Studies (JCHS) at Harvard University, which used data from the 2022 Survey of Consumer Finances, the median home equity for homeowners aged 65 and older was approximately $250,000 that year(1). So, selling your family home is like cashing in your lottery ticket.
However, the deal can also trigger hidden health insurance traps that increase your premiums. Without proper planning, you could be paying thousands of dollars in unnecessary medical bills.
Here’s what older homeowners in America need to know before buying a home.
Medicare is a complex system with many moving parts, but in this case, focus on the Income-Related Monthly Adjustment Amount (IRMAA).
IRMAA is a surcharge that may increase Medicare Part B and Medicare Part D premiums if your income is above a certain threshold. In 2026, the threshold is $218,000 for married couples filing jointly and $109,000 for individuals (2).
In fact, IRMAA is calculated based on your family’s modified adjusted gross income (MAGI). It typically includes capital gains, meaning the net profit from selling your home can bring your income over the threshold, according to AARP (3).
So if you bought a home in the 1990s for $200,000 and sold it today for $800,000, the resulting capital gains could easily push you over the IRMAA threshold and trigger premiums.
Depending on the size of your MAGI, your monthly premiums could rise from more than $202.90 for the highest IRMAA tier to as high as $689.90, according to the Medicare Entitlement Center(4).
Selling your home before you qualify for health insurance is not a solution. The Social Security Administration (SSA) generally uses income from two years ago to determine your current MAGI, which means your premiums for 2026 are determined by the income you earned in 2024(2).
In fact, if you sell your home anytime after age 63, this surcharge becomes a consideration.
Given that a typical 65-year-old can expect to spend approximately $172,500 in total health care-related expenses during retirement, any additional premiums or surcharges could significantly disrupt financial plans. Fortunately, there are ways to avoid this problem.
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Perhaps the best way to avoid this unfortunate situation is to carefully manage the timing of your property sale.
If the home you want to sell is your primary residence and you have lived in it for at least two of the past five years, you may qualify for the capital gains exemption. The IRS allows you to deduct up to $250,000 of capital gains if you are single or $500,000 if you are married and filing jointly (5).
Keep in mind that these exclusions only apply to capital gains, not gross sales proceeds. Certain home improvements, selling expenses, and some closing costs can be added to your cost basis, which may reduce your taxable gain(6).
According to the National Council on Aging(7), older Americans typically spend about 25% of their total expenses on housing costs.
If you’re also facing housing cost burdens, downsizing may help. If you’re under 63 and considering downsizing, selling early can help you avoid IRMAA entirely. If you’re older, aging in place may reduce your risk of triggering higher premiums.
A financial advisor can help you figure out these numbers so the sale doesn’t result in a huge tax bill.
This is where platforms like Advisor.com come in. This platform allows you to find vetted FINRA/SEC registered experts near you for free.
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Ultimately, if you sell a high-value property or rental property portfolio after age 63, you may not be able to avoid triggering the IRMAA surcharge. You can consider it a one-time expense, especially if your income returns to normal within a few years of the sale.
Still, knowing this potential pitfall can make it easier for you to plan ahead and avoid surprises.
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Harvard University Joint Center for Housing Studies (1); Social Security Administration (2); AARP (3); Center for Medicare Rights’ Medicare Interactive (4); Internal Revenue Service (5), (6); National Council on Aging (7)
This article provides information only and should not be considered advice. It is provided without any warranty of any kind.
