Key Takeaways
- Your Medicare Part B and Part D premiums can increase if your income surpasses specific thresholds, as determined by the Income-Related Monthly Adjustment Amount (IRMAA).
- IRMAA is based on your tax return from two years ago, so even if your income decreases, you may still face higher premiums temporarily.
What Is IRMAA and Why Should You Care?
If your income is on the higher side, you don’t just pay the standard Medicare Part B and Part D premiums—you also get hit with an extra charge called the Income-Related Monthly Adjustment Amount (IRMAA). This means Medicare becomes pricier for high earners.
IRMAA is calculated annually based on your modified adjusted gross income (MAGI) from your federal tax return two years ago. So, for 2025, your IRMAA is determined using your 2023 tax return. Knowing how IRMAA works can help you plan for costs, retirement, and even find ways to lower what you pay down the line.
How Does IRMAA Impact Your Medicare Costs?
Higher Premiums Tied to Income
IRMAA bumps up your Medicare Part B and Part D premiums based on your income. If your MAGI is above the set threshold, you’ll shell out more than the standard premium. These extra charges hit every month and are taken straight from your Social Security benefits or billed separately if you’re not on Social Security yet.
IRMAA Thresholds for 2025
The income brackets that decide if you owe IRMAA get updated yearly. For 2025, the IRMAA thresholds are:
- Individual tax filers: More than $106,000
- Married couples filing jointly: More than $212,000
If your income falls into these brackets, expect to pay more than the standard Medicare premium. The higher your income, the steeper your IRMAA charge.
IRMAA Hits Both Part B and Part D
While many folks focus on their Medicare Part B premiums, don’t forget IRMAA also applies to Part D prescription drug coverage. This means higher costs for both your doctor visits and meds.
IRMAA Uses Your Tax Return From Two Years Ago
Your 2023 Income Sets Your 2025 IRMAA
One tricky part of IRMAA is it doesn’t use your current income—it’s based on your tax return from two years ago. So, your 2025 IRMAA amount is figured using your 2023 tax return.
What If Your Income Has Dropped?
If your income has taken a nosedive since 2023 because of a big life change like retirement, you might be able to appeal your IRMAA determination. Medicare lets you ask for a reconsideration if you can show your current income is much lower than it was two years ago.
You Can Appeal an IRMAA Decision If Your Income Drops
Qualifying for an IRMAA Reconsideration
Medicare has a process to appeal your IRMAA charges if you’ve had a major life event that slashed your income. Some qualifying events include:
- Retirement or cutting back work hours
- Losing a pension
- Divorce or the death of a spouse
- Losing rental or business income
How to File an Appeal
Think you qualify for an IRMAA reduction? Fill out Form SSA-44 and send it to the Social Security Administration (SSA) with supporting documents. Winning your appeal could lower your monthly Medicare costs, saving you a good chunk of change each year.
IRMAA Adjustments Happen Every Year
IRMAA Isn’t Set in Stone
Each year, the government reassesses IRMAA based on the latest tax data. Even if you paid an IRMAA surcharge in 2025, you might dodge it in 2026 if your income drops below the threshold.
The IRS Automatically Reports Your Income
You don’t have to lift a finger for IRMAA to be recalculated—it’s done automatically using IRS records. But if you think your income will go down, consider tweaking your tax strategy to cut down on future IRMAA charges.
Smart Moves to Reduce or Avoid IRMAA
Tax Strategies to Keep Your MAGI in Check
Since IRMAA is based on your MAGI, managing your taxable income can help you reduce or dodge these extra Medicare costs. Some strategies include:
- Roth Conversions: Shifting money from a traditional IRA to a Roth IRA in low-income years can help keep your taxable income down in retirement.
- Health Savings Accounts (HSAs): Withdrawals for qualified medical expenses from an HSA are tax-free and don’t count toward your MAGI.
- Delaying Social Security Benefits: Social Security income is partly taxable, so holding off on benefits can help keep your MAGI below the IRMAA threshold.
- Charitable Contributions: Qualified charitable distributions (QCDs) from your IRA can be tax-free, lowering your taxable income.
Keep an Eye on Your Income Yearly
Even if you’re already paying IRMAA, being proactive with tax planning can help cut your future Medicare costs. Watching your MAGI each year ensures you stay under the IRMAA thresholds when you can.
Understanding IRMAA Helps You Plan Your Medicare Costs
IRMAA can seriously hike up your Medicare bills, but knowing how it works, when it kicks in, and how to lessen its blow can help you manage your healthcare expenses better. If you think your income will push you over the IRMAA threshold, consider tax strategies to minimize the hit. And if your income has recently dropped, don’t forget to appeal to possibly lower your premiums.
Got questions about how IRMAA affects your Medicare costs? Reach out to a licensed agent listed on this website. They can help you sort through the details and explore your options.
