If you're on Medicare, your income can affect how much you pay for Parts B and D each month. This extra cost is called the Income-Related Monthly Adjusted Amount (IRMAA). Knowing how it works can help you plan your budget and avoid surprises. Here's everything you need to know.
IRMAA is an additional charge added to your Medicare Part B and Part D premiums if your income exceeds certain thresholds. The Social Security Administration (SSA) looks at your income from two years ago to determine if you'll have to pay it. For instance, your 2025 IRMAA is based on your income from 2023.
The SSA calculates this using your Modified Adjusted Gross Income (MAGI), which includes your adjusted gross income plus any tax-free interest income. If your income is above the set limits, your Medicare premiums increase.
Single Filers | Joint Filers | Additional Monthly Premium |
≤ $106,000 | ≤ $212,000 | $0.00 |
$106,000 - $133,000 | $212,000 - $266,000 | $74.00 |
$133,000 - $167,000 | $266,000 - $334,000 | $185.00 |
$167,000 - $200,000 | $334, 000 - $400,000 | $295.90 |
$200,000 - $500,000 | $400,000 - $750,000 | $406.90 |
≥ $500,000 | ≥ $750,000 | $443.90 |
For Part D, additional charges depend on your income level and the drug plan you choose. Although these costs might seem minor in lower brackets, they can add up significantly over time.
If you're subject to IRMAA, you'll receive a letter from the SSA detailing the extra charges and income levels used in the calculation. If you've had a life-changing event that reduced your household income, you can ask to lower the additional amount you'll pay for Medicare Part B and Part D. If you believe there's an error or your income has dropped, you can request an adjustment.
There are seven qualifying life-changing events:
A common occurrence in which an appeal may make sense is the year of retirement. If your retirement results in a lower income than what was reported on your tax return two years prior, you may qualify to appeal the IRMAA determination and potentially lower your premiums.
If you meet a qualifying event, submit IRMAA appeal form SSA-44 to report these changes and request an adjustment. Including additional documentation to support your claim, such as a cover letter detailing your recent change in income, could be beneficial in the reconsideration process.
Even if your income triggers IRMAA, there are strategies to reduce or avoid it:
Smart financial planning can help you stay below IRMAA thresholds. For example:
Keeping track of your income can help you avoid crossing IRMAA thresholds. Strategies include limiting capital gains, adjusting dividend income, or offsetting taxable income with deductions. A financial planning professional can guide you through these.
Remember, IRMAA uses income data from two years prior. If you've had a high-income year recently but expect lower earnings in the future, prepare for temporary higher costs.
IRMAA can significantly increase your Medicare expenses, but you can manage these costs effectively with proactive planning and informed decisions.
Stay updated, track your income, and seek professional advice from your financial advisor and CPA to make the most of your Medicare benefits. Whether you're just learning about IRMAA or addressing a recent notice, these steps can help you save money and reduce stress.
If you have questions about or need help employing strategies to better manage your retirement finances and mitigate the impact of IRMAA on your Medicare premiums, our financial advisors can guide you through this process.
Any discussion of taxes is for general information purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax, or accounting advice. Clients should confer with their qualified legal, tax, and accounting advisors as appropriate.
CRN202801-8027286
The team at Spaugh Dameron Tenny works to present timely educational content that benefits doctors and their unique financial situations.
A Roth IRA is a tax-advantaged retirement savings option. Unlike a Traditional IRA, contributions to a Roth IRA are made with after-tax income and ...
Read More →When it comes to retirement savings, 401(k) and 457(b) plans are both popular options, but they have some key differences. While private employers ...
Read More →As the new year begins, it can be challenging to keep track of all the new investment and tax changes and updates from one year to the next. The ...
Read More →