Selling a home and IRMAA

The exclusion in plain terms

When you sell a home you owned and lived in as your main residence for at least two of the five years before the sale, you can exclude up to $250,000 of gain from your income, or $500,000 if you are married and file jointly. The excluded part never appears in your adjusted gross income, so it never reaches MAGI.

Gain is the sale price minus selling costs, minus your basis. Basis is what you paid plus the cost of major improvements, such as a new roof, an addition or a kitchen remodel. Many long-time homeowners underestimate their basis because they no longer have improvement records, and that inflates the taxable gain.

The exclusion amounts are set in law and have not changed since 1997, while home prices have nearly tripled nationally since then. That is why a growing number of retirees who downsize find part of their gain taxable for the first time.

What different gains do to IRMAA

The table assumes a single filer with $60,000 of other MAGI and a married couple, both on Medicare, with $80,000. Figures use the 2026 brackets and show the extra yearly Medicare cost compared with the standard premium.

Two things stand out. First, a single filer's $300,000 gain costs only $1,148 because it barely crosses the first cliff, while $400,000 costs over $6,300 because it jumps four tiers at once. Second, the joint exclusion is so much larger that the same $600,000 gain that would hurt a single seller costs a married couple nothing in IRMAA. Timing a sale while both spouses are alive and filing jointly can matter a great deal.

A worked example

Helen, 70 and widowed, sells the family home in 2026 for $720,000. She and her late husband bought it for $180,000 and spent $90,000 on improvements over the years, and selling costs are $40,000. Her gain is $720,000 − $40,000 − $270,000 = $410,000. Filing as single, she excludes $250,000, leaving $160,000 taxable. With her pension and Social Security, her 2026 MAGI reaches $220,000, in tier four. Her 2028 Medicare premiums will be about $6,355 higher than the standard amount for that one year, and then return to normal in 2029 when her income does.

Had she sold within two years of her husband's death, she might have qualified for the full $500,000 exclusion as a surviving spouse, keeping her entire gain out of income. That rule is easy to miss.

Ways to plan a sale around IRMAA

• Document your basis. Every dollar of improvements you can prove lowers the taxable gain. Gather receipts, permits and contractor invoices before you list the home.
• Mind the surviving-spouse window. A widowed seller may keep the $500,000 exclusion if the sale closes within two years of the spouse's death and other conditions are met.
• Keep the rest of the year quiet. Avoid stacking a Roth conversion or large capital gains in the year of the sale; that year is already high.
• Consider an installment sale for rentals and second homes. Spreading a taxable gain over several years can keep each year below a cliff. This does not apply to the excluded part of a main-home gain.
• Budget for the premium bump. If the jump is unavoidable, set aside the extra premium for two years after the sale.

Moving into a retirement community

Many sellers are downsizing into a continuing care retirement community. Part of a CCRC entrance fee can sometimes be deducted as a medical expense, but that deduction is itemized, so it lowers taxable income and not MAGI. It will not offset the gain for IRMAA purposes. If the sale and the move happen in the same year, expect that year's MAGI to be high and plan the premium increase for two years later, rather than counting on deductions to absorb it.

Frequently asked questions

Sources

• IRS Publication 523: Selling Your Home
• IRS Topic 701: Sale of your home
• CMS: 2026 Medicare Parts B premiums and deductibles

Related guides

• Capital gains and IRMAA
• IRMAA after the death of a spouse
• The 8 life-changing events