Key Takeaways:
-
IRMAA (Income-Related Monthly Adjustment Amount) applies to high-income Medicare beneficiaries and can significantly impact your monthly Medicare Part B and Part D premiums.
-
Your IRMAA determination is based on your tax return from two years ago, so planning ahead can help you manage potential increases.
What Is IRMAA and Why Does It Matter?
If your income is above a certain threshold, you don’t just pay the standard Medicare Part B and Part D premiums—you also pay an additional charge known as the Income-Related Monthly Adjustment Amount (IRMAA). This surcharge is based on your modified adjusted gross income (MAGI) from two years ago, meaning your 2025 IRMAA determination is based on your 2023 tax return.
The Social Security Administration (SSA) reviews your income annually and applies IRMAA automatically if your income exceeds the established limits. These additional costs can add up quickly, so understanding how IRMAA works is crucial if you want to avoid unexpected expenses.
How IRMAA Is Calculated and What Triggers It
The Two-Year Lookback Rule
One of the most important aspects of IRMAA is that it’s calculated based on your income from two years prior. This means your 2025 Medicare premiums are determined using your 2023 tax return. Even if your income has dropped since then, the SSA still bases your IRMAA on past earnings unless you qualify for an adjustment.
Income Thresholds That Trigger IRMAA
Each year, the IRS sets income brackets that determine who pays IRMAA. These thresholds adjust annually for inflation, and in 2025, they apply to individuals with a MAGI above $106,000 and couples earning more than $212,000. The higher your income, the more you pay in IRMAA surcharges on top of your standard Medicare Part B and Part D premiums.
How MAGI Is Calculated
Your MAGI includes your adjusted gross income (AGI) plus tax-exempt interest income. It encompasses earnings from various sources, including wages, Social Security benefits, pensions, capital gains, and rental income. Understanding what contributes to your MAGI can help you anticipate whether you’ll be subject to IRMAA.
Can You Appeal Your IRMAA Determination?
Life-Changing Events That May Reduce Your IRMAA
If your income has decreased significantly since the tax year used to determine your IRMAA, you may be eligible for an adjustment. The SSA allows you to file an appeal if you’ve experienced a qualifying life-changing event, such as:
-
Retirement or reduced work hours
-
Divorce or death of a spouse
-
Loss of income-producing property
-
Reduction in pension income
-
Employer settlement payments ending
How to Request an IRMAA Adjustment
If you qualify for an adjustment, you must file Form SSA-44 and provide documentation proving your income has decreased. The sooner you submit your appeal, the sooner you may see a reduction in your IRMAA surcharges.
How to Plan Ahead and Avoid Unnecessary IRMAA Charges
Managing Withdrawals from Retirement Accounts
Large withdrawals from tax-deferred retirement accounts like a 401(k) or traditional IRA can push your MAGI above the IRMAA threshold. If possible, consider spreading withdrawals over multiple years to avoid sudden income spikes that could increase your Medicare costs.
Utilizing Roth Conversions
Converting a traditional IRA into a Roth IRA early in retirement may help reduce taxable income in later years. Roth distributions are not included in MAGI calculations for IRMAA purposes, making them a useful strategy for keeping your income below the threshold.
Timing Capital Gains and Other Income
Selling investments or real estate at a large gain can increase your income and trigger IRMAA. If you plan on selling assets, consider spreading transactions across multiple tax years or utilizing tax-loss harvesting strategies to offset gains.
The Impact of IRMAA on Your Medicare Costs in 2025
IRMAA Tiers and Monthly Premium Increases
For 2025, the standard Medicare Part B premium is $185 per month, but if you’re subject to IRMAA, you could pay significantly more. IRMAA surcharges range from a few hundred dollars to well over a thousand dollars annually, depending on your income tier.
For Medicare Part D, IRMAA is added on top of your prescription drug plan premium, increasing your total costs for coverage.
How IRMAA Affects Couples
If you’re married and file jointly, IRMAA applies based on your combined MAGI. Even if only one spouse is enrolled in Medicare, the SSA considers both incomes when determining whether you owe additional surcharges.
Yearly Re-Evaluations
IRMAA is not a one-time fee—it’s reassessed every year based on your tax return from two years ago. If your income fluctuates, your IRMAA charges could change accordingly.
What You Can Do Now to Prepare for IRMAA
Review Your Tax Returns and Anticipate Future IRMAA Brackets
Since IRMAA is based on past income, reviewing your tax returns from two years ago can give you a good idea of what to expect. Planning ahead can help you minimize or avoid unnecessary charges.
Consider Working with a Financial Professional
A financial advisor who understands Medicare can help you develop tax-efficient withdrawal strategies, structure investments, and take advantage of available deductions to manage your income and potential IRMAA surcharges.
Keep Up with Annual Medicare and Tax Updates
Since IRMAA income brackets and Medicare costs change annually, staying informed about adjustments can help you plan accordingly. Checking for updates each year ensures you’re not caught off guard.
Smart Planning Can Help You Minimize IRMAA Costs
IRMAA can be a costly surprise if you’re not prepared, but with the right planning, you can manage or even avoid these additional charges. Understanding how your income affects your Medicare costs, knowing how to appeal unnecessary surcharges, and strategically managing your taxable income can all help you stay within your budget.
If you need help navigating your Medicare costs and understanding how IRMAA may impact you, get in touch with a licensed agent listed on this website for expert guidance tailored to your situation.
