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For many retirees, selling their home is one of the biggest financial windfalls they’ll see 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 — median home equity for homeowners age 65 and over was about $250,000 that year (1). As a result, selling the family home could feel like cashing in a lottery ticket.
However, the transaction could also trigger a hidden Medicare trap that increases your premiums. Without proper planning, you could pay thousands of dollars in unnecessary healthcare costs.
Here’s what older American homeowners need to know before pulling the trigger.
Medicare is a complicated system with many moving parts, but in this instance it’s important to focus on Income-Related Monthly Adjustment Amount (IRMAA).
IRMAA is a surcharge that can increase premiums for Medicare Part B and Medicare Part D if your income is above a certain threshold. In 2026, the threshold is $218,000 for a married couple filing tax jointly and $109,000 for a single individual (2).
In practice, IRMAA is calculated based on your household Modified Adjusted Gross Income (MAGI). It generally includes capital gains, meaning the net profit from the sale of a home can push your income over the threshold, according to the AARP (3).
So if you purchased your home for $200,000 in the 1990s and sell it for $800,000 today, the resulting capital gain could easily put you above the IRMAA thresholds and trigger premiums.
Depending on the magnitude of your MAGI, your monthly premiums could rise from above $202.90 to as much as $689.90 under the highest IRMAA tier, according to the Medicare Rights Center (4).
Selling your home just before you qualify for Medicare isn’t a solution. The Social Security Administration (SSA) generally uses income from two years prior to determine your current MAGI, which means your 2026 premiums are determined by the income you earned in 2024 (2).
In effect, this surcharge becomes a consideration if you sell your home at any point after turning 63.
Given that a typical 65-year-old is estimated to spend roughly $172,500 on total healthcare-related costs over the course of retirement, any additional premiums or surcharges can meaningfully 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 sale.
If the home you wish to sell is your primary residence and you’ve lived in it for at least two of the past five years, you could qualify for a capital gains exclusion. The Internal Revenue Service allows you to exclude up to $250,000 of capital gains if you’re single and up to $500,000 if you’re married and filing taxes jointly (5).
Remember that these exclusions apply only to capital gains, not total sale proceeds. Certain home improvements, selling expenses and some closing costs can be added to your cost basis, which may reduce your taxable gain (6).
Older Americans typically spend about 25% of total expenses on housing costs, according to data from the National Council of Aging (7).
If you are also facing a housing cost burden, downsizing might be beneficial. If you’re younger than 63 and thinking about downsizing, selling earlier can help you avoid IRMAA altogether. If you’re older, aging in place may reduce the risk of triggering higher premiums.
A financial advisor can help you work out the numbers so that the sale doesn’t result in a huge tax bill.
That’s where platforms like Advisor.com come in. You can find vetted FINRA/SEC-registered experts 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 an expert best suited to your needs.
Since all the advisors on their roster are fiduciaries, they’re legally required to act in your best interests.
Set up a free initial consultation today to find the right fit for you.
Ultimately, if you’re selling a high-value property or a portfolio of rental properties after age 63, triggering an IRMAA surcharge may be impossible to avoid. You could consider this a one-time toll, especially if your income normalizes in the years after the sale.
Still, understanding this potential pitfall can make it easier to plan ahead and avoid surprises.
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We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Joint Center for Housing Studies at Harvard University (1); Social Security Administration (2); AARP (3); Medicare Interactive by Medicare Rights Center (4); IRS (5), (6); National Council of Aging (7)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
