If I were to receive a large (~lets just say $1 million) lump sum for the sale of my mineral interest (assume it’s all gain - ie, no basis), will this affect my social security income. I’m retired.
I"m looking for any tax gotchas that I’m unaware of.
Contact your CPA for professional advice. I doubt that it will affect SS, but get a pro to answer as a sale might put you in a different tax bracket for a year. And get good financial planning advice as well!
Not tax / legal advice here, but my understanding is that only income affects potential social security reductions. There may be capital gains or other tax issues. Check with you CPA.
This post is not legal, tax or investment advice. Reading or responding to this post does not create an attorney/client relationship.
The mineral sale will not affect your SS GROSS benefits going forward, but you will have a couple different issues to address. With a large mineral sale as described, 85% of your SS benefits will be taxable in the year of sale and here is the gotcha moment, in the second year after the sale year, your medicare premiums will increase and be subject to a premium surcharge. So, it will greatly affect you NET benefits in a future year that most people are unaware of. Learn more on the surcharge at Costs | Medicare
However, those are transitory tax/medicare charges that revert after year 2 that will be dwarfed by your $1M sale price. This ignores the change in income that will result in future years where you will no longer receive royalty income but instead will receive investment income from stocks and bonds.
If you are on Medicare, it likely will make your monthly payments go up. Medicare uses a sliding scale for monthly payments based on annnual income as reported on your tax return. You may be looking at $500 a month or more. There are very few exemptions to paying more.
It depends a lot on the basis of the asset you are selling. If you just inherited it, you might be able to get away without a capital gain. Or if the value has gone down since the time you inherited it.
Maybe so. The first threshold for Medicare is $103,000 for an individual tax return and $206,000 for a joint return. Income over that causes the monthly payment to go up. It would be wise to talk to an accountant.