6 Little-Known Triggers for Complex Tax Planning You Must Know Before You File

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Having a complex tax planning situation isn’t only reserved for those with a business or a seven-figure income. In many cases, a single life event like an inheritance or home sale can push your tax situation beyond filing a simple form. 

Some of these tax triggers may change what you owe if you’re not prepared.

1. Crossing a Medicare IRMAA Threshold

Medicare premiums are based on factors like your income in addition to your choice of healthcare coverage. If your modified adjusted gross income (MAGI) crosses certain thresholds, Medicare can add in an income-related monthly adjustment amount (IRMAA) to your Part B and Part D premiums.

Medicare can catch people off guard, though, by looking back at your income from two years ago. According to the Social Security Administration, Medicare will assess your 2026 adjustment amounts based on your most recent federal tax return that the IRS provides. In January, this means that it’s most likely from a tax return you filed in 2025 for the 2024 tax year. 

Even if you don’t have the same income you did two years ago (or whenever the IRS supplies the SSA with your most recent tax return), you may still cross the income threshold without realizing it and be hit with the surcharge. 

2. Selling a Home for Profit Above the Capital Gains Exclusion 

Many homeowners assume profits from selling a primary residence are tax-free. They generally are, if the profit from selling your home is at or under $250,000 if you’re a single filer, or up to $500,000 for those filing jointly. According to the IRS, any profit above this amount is taxable. 

If you don’t meet certain conditions, your profit could count as short-term gains and potentially push you into a higher tax bracket. Tax planning in this case could mean timing the sale to meet exclusions. 

3. Inheriting Retirement Accounts 

Receiving an inheritance could mean that you’d need to adhere to more complex rules. For instance, if you’ve inherited an IRA, you may need to withdraw the entire amount within 10 years if the account isn’t from your spouse. If you don’t handle these withdrawals properly, it could mean the distributions count as taxable income. 

4. Earning Side-Hustle Income

Picking up consulting work or starting a side hustle can help you make more income, but it also changes how you’re taxed. These types of work count as self-employed income and are subject to self-employment tax, which typically requires quarterly estimated tax payments.

If you fail to report your income or pay estimated taxes, you could be subject to penalties.

5. Claiming Social Security While Still Earning a Paycheck

Claiming Social Security before full retirement age while continuing to work can complicate your taxes. Aside from the fact that your benefits may be temporarily lowered if your income exceeds annual limits, your Social Security benefits may be taxable. 

Depending on your total combined income, up to 85% of your benefits could be subject to tax. 

6. Hitting Required Minimum Distribution Age

Once you reach age 73, the IRS generally requires minimum distributions from certain retirement accounts. These accounts include your 401(k) or traditional IRAs. These withdrawals are called required minimum distributions (RMDs) and can significantly increase your taxable income.

RMDs can also mean you’ll have higher Medicare premiums and whether your Social Security benefits may be taxed. A common tax strategy is to use Roth conversions to minimize RMDs.

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