Key Takeaways
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IRMAA can increase your Medicare Part B and Part D premiums significantly if your income is above certain thresholds.
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There are strategies you can use to reduce or manage IRMAA, including income adjustments and tax-efficient withdrawals.
What Is IRMAA and How Does It Impact Your Medicare Premiums?
Medicare premiums aren’t the same for everyone, and if your income is above a certain level, you may have to pay more for your Medicare Part B and Part D coverage. This extra charge is known as the Income-Related Monthly Adjustment Amount (IRMAA), and it can make your healthcare costs much higher than expected.
IRMAA is based on your modified adjusted gross income (MAGI) from two years prior. That means in 2025, your IRMAA determination is based on your 2023 income tax return. If your income exceeds specific thresholds, you will pay an additional monthly amount on top of your standard Medicare premiums.
Understanding IRMAA is essential so you can take steps to manage your income and avoid unnecessary premium increases.
1. How IRMAA Increases Your Medicare Costs
IRMAA applies to both Medicare Part B and Medicare Part D, and it is added to your monthly premiums if your income exceeds a certain level. The standard Medicare Part B premium in 2025 is $185 per month, but IRMAA can push this amount significantly higher. The same applies to Medicare Part D prescription drug plans, where the additional IRMAA charge can increase your overall monthly costs.
Here’s how the extra charge works:
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Medicare Part B: IRMAA adds an extra amount to your standard premium, with higher-income beneficiaries paying more.
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Medicare Part D: IRMAA is charged separately, and the additional amount is paid directly to Medicare, not your plan provider.
2. Understanding the IRMAA Income Thresholds
The income brackets that determine IRMAA change yearly. In 2025, the thresholds are based on your 2023 modified adjusted gross income (MAGI). Here’s a general breakdown of the income brackets that could trigger IRMAA:
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Individuals earning over $106,000 or couples earning over $212,000 will have to pay an additional premium.
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The higher your income, the more you will pay in IRMAA surcharges.
These brackets are adjusted for inflation, so they may change slightly each year.
3. How IRMAA Is Calculated and Applied
The Social Security Administration (SSA) reviews your tax return from two years ago to determine if you owe IRMAA. If your income exceeds the threshold, SSA will send you a determination letter explaining how much extra you will need to pay.
If your income has recently changed due to life events such as retirement, SSA provides an appeal process, allowing you to request a reconsideration of your IRMAA determination.
4. How to Appeal an IRMAA Decision
If your income has decreased since the tax year used for IRMAA calculations, you can file an appeal to have your premiums adjusted. Some qualifying life events include:
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Retirement or reduced work hours
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Marriage, divorce, or death of a spouse
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Loss of income-producing property
To appeal, you must complete Form SSA-44 and provide documentation supporting your income reduction.
5. Strategies to Reduce or Avoid IRMAA
While IRMAA is unavoidable for some, there are strategies to reduce its impact:
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Roth Conversions: Converting traditional IRA funds into a Roth IRA can reduce taxable income in future years.
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Tax-Efficient Withdrawals: Managing withdrawals from taxable retirement accounts can help keep your income below IRMAA thresholds.
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Delaying Social Security Benefits: Since Social Security benefits increase your taxable income, delaying benefits can sometimes help you stay under the IRMAA limit.
6. How Medicare Beneficiaries Can Plan for IRMAA
Proper financial planning can help you avoid sudden increases in your Medicare premiums. Working with a financial planner or tax advisor can help you structure your income to minimize IRMAA charges.
Reviewing your income sources each year can ensure that you don’t unintentionally cross into a higher IRMAA bracket.
7. The Long-Term Impact of IRMAA on Your Retirement Budget
IRMAA can add up over time, significantly increasing healthcare costs during retirement. By planning ahead and understanding how it is calculated, you can take steps to manage your income and reduce unnecessary costs.
Taking Control of Your Medicare Costs in 2025
Understanding IRMAA and how it affects your Medicare premiums is crucial for managing your healthcare expenses. By planning ahead and considering income management strategies, you can reduce the impact of IRMAA and keep more money in your pocket.
To learn more about managing your Medicare costs, get in touch with a licensed agent listed on this website. They can help you navigate your options and provide guidance tailored to your financial situation.
