Many people who are in retirement, or nearing retirement, have a significant amount of equity in their homes. In fact, homeowners who bought properties affordably decades ago may now be sitting in homes worth hundreds of thousands or even millions of dollars.
Selling these homes could be a good way to free up more money to live on as a senior, especially for those who may not have quite enough money saved in their retirement plans.
In fact, recent research from Vanguard found that if baby boomers sell their homes and rent in retirement, this could increase retirement readiness by 20 percentage points and put 60% of boomers on track to maintain their lifestyle in their later years.
If you're thinking about selling, though, you need to understand that this decision could potentially send your Medicare premiums skyrocketing.
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How selling your home could impact your Medicare premium costs
Medicare premiums in 2026 total $202.90 per month for most retirees, which is a pretty reasonable amount to pay for coverage, considering those on Medicare tend to be older and sicker than the general population.
Not everyone pays so little, though. Some retirees pay much higher premiums for Medicare Part B and Part D because an Income-Related Monthly Adjustment Amount (IRMAA) is applied in 2026 if you have $218,000 in income as a married couple filing taxes jointly or $109,000 as a single tax filer.
Depending on just how high your income is, your premiums could go as high as $689.90, which is the 2026 rate for the highest IRMAA tier, according to the Centers for Medicare and Medicaid Services (CMS).
So, does selling your house affect that? It's simple: Your premiums are based on income, and if you sell your house for a large profit, the profit you make can count as income for determining Medicare costs.
How much will your Medicare premiums go up if you sell a house?
The Social Security Administration uses income from two years prior to get the Modified Adjusted Gross Income (MAGI) that's used to determine Medicare premiums.
This is why selling your home after 63 matters -- because as soon as you hit that age, the MAGI you're reporting that year will affect Medicare premiums at age 65. Likewise, if you sell at 64, this will affect premiums at 66, and so on. And MAGI includes capital gains, which you may owe if you sell your home for a generous profit.
Now, you can typically claim a capital gains exclusion for part of the profits if you're selling your primary residence, provided you meet requirements, including owning the home for at least 24 months out of the five years before the sale and using the home as a residence for at least 24 months out of the prior five years.
If you meet these requirements, you can exclude up to $250,000 in gains if you file your taxes as a single filer, or $500,000 if you file your taxes as a married joint filer. However, depending on just how much profit you're making, you could still see a large gain that affects Medicare premiums if you sell after 63. And if you don't qualify for the exclusion for some reason, this is much more likely to be an issue.
Retirees should be aware of this effect of a home sale so they can plan accordingly for when and how to downsize and prepare if their decision to sell will affect Medicare costs.
