Key Takeaways
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IRMAA, or the Income-Related Monthly Adjustment Amount, increases Medicare Part B and Part D premiums for individuals and couples earning above specific income thresholds.
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Understanding how IRMAA works and planning your finances can help reduce unexpected costs and maximize your Medicare benefits.
What Is IRMAA and Why Does It Matter?
If you’re enrolled in Medicare and fall into a higher income bracket, you may already be familiar with IRMAA. For those who aren’t, the Income-Related Monthly Adjustment Amount is an additional charge added to your Medicare Part B (medical insurance) and Part D (prescription drug coverage) premiums. It applies to individuals and couples whose modified adjusted gross income (MAGI) exceeds specific thresholds set by the federal government.
In 2025, IRMAA starts at incomes of $106,000 for individuals and $212,000 for couples filing jointly. These thresholds are based on your MAGI from your tax return filed two years earlier. So, for 2025, your 2023 income determines whether IRMAA applies to you. Understanding IRMAA is crucial because it directly impacts how much you’ll pay for Medicare coverage.
1. Higher Income Equals Higher Premiums
IRMAA affects your Medicare premiums by adding an extra amount on top of the standard premiums for Part B and Part D. The higher your income, the higher the adjustment amount you’ll pay. For example, while the standard Medicare Part B premium in 2025 is $185 per month, individuals in the highest IRMAA tier could pay over twice that amount.
Part D premiums are similarly affected. IRMAA doesn’t replace your Part D premium but adds a surcharge based on your income. This surcharge is paid directly to Medicare, not your Part D plan provider.
How to Check If IRMAA Applies to You
To see if IRMAA impacts your costs, review your MAGI from two years ago. The Social Security Administration (SSA) uses your tax return to determine whether you fall into a higher income bracket. You’ll receive a letter from SSA notifying you of any IRMAA charges.
2. IRMAA Is Based on MAGI—Not Just Your Salary
Many people assume IRMAA is determined solely by their salary, but that’s not the case. MAGI includes adjusted gross income (AGI) plus tax-exempt interest, like municipal bond income. Common sources of MAGI include:
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Wages and salaries
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Investment income
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Retirement account distributions
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Rental property income
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Capital gains
Because MAGI considers a broad range of income sources, even retirees with modest salaries but significant investment or rental income could find themselves subject to IRMAA.
3. IRMAA Charges Are Reviewed Annually
IRMAA isn’t a one-time determination. Each year, the SSA reviews your MAGI from two years earlier to decide whether IRMAA applies. For example, in 2025, your 2023 MAGI determines your Medicare costs. If your income fluctuates year to year, you could move in and out of IRMAA brackets annually, leading to changes in your premiums.
Keeping Tabs on Changes
Because IRMAA is reviewed annually, keeping track of your income and tax filings is essential. If your income drops significantly due to life changes like retirement, you can appeal IRMAA charges (more on that below). On the flip side, an unexpected financial windfall, like selling a property, could push you into a higher bracket.
4. Major Life Changes Could Lower IRMAA
If you experience a life-changing event that reduces your income, you might qualify for a reduction or elimination of your IRMAA charges. Life-changing events include:
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Retirement or reduced work hours
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Divorce or marriage
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Death of a spouse
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Loss of pension income
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Natural disasters impacting income
To request a review of your IRMAA determination, you’ll need to file Form SSA-44 with documentation supporting your claim. If approved, your premiums could decrease significantly.
Timing Matters
If you’re planning to retire or make other significant changes that will impact your income, timing can be critical. For instance, retiring earlier in the year could lower your MAGI for the following year, potentially reducing IRMAA charges.
5. IRMAA Appeals Are Possible
Nobody likes paying more than they have to, especially when it comes to healthcare costs. If you believe your IRMAA determination is incorrect or outdated, you can file an appeal with the SSA. Common reasons to appeal include:
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Errors on your tax return
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Incorrect information used by SSA
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A significant income reduction not reflected in the two-year lookback period
How to File an Appeal
Appealing your IRMAA determination requires completing Form SSA-44 and providing documentation, such as tax records or proof of life-changing events. Be prepared to support your case thoroughly, as the SSA may require additional information.
6. IRMAA Can Impact Couples Differently
For married couples, IRMAA calculations are based on your joint MAGI if you file taxes together. This can create situations where one spouse’s income increase affects the other’s Medicare costs, even if their personal income hasn’t changed.
Planning Ahead as a Couple
To minimize the impact of IRMAA, couples can consider strategies like:
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Coordinating withdrawals from retirement accounts to avoid pushing MAGI over IRMAA thresholds
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Filing taxes separately (though this could have other implications)
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Timing income-generating activities, such as selling investments, to spread gains across multiple years
7. Planning Ahead Can Help You Avoid IRMAA
While you can’t always avoid IRMAA, careful financial planning can help minimize its impact. Some strategies include:
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Managing Retirement Withdrawals: Be mindful of required minimum distributions (RMDs) and consider Roth conversions, which don’t count toward MAGI.
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Harvesting Tax Losses: Offset gains with losses from investments to keep your MAGI lower.
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Charitable Contributions: Use qualified charitable distributions (QCDs) from IRAs to reduce taxable income.
Consult a Financial Advisor
Because IRMAA calculations involve multiple income sources, consulting with a financial advisor or tax professional can be invaluable. They can help you develop a strategy tailored to your financial situation.
What Happens If You Don’t Pay IRMAA?
Failing to pay IRMAA charges can have serious consequences. Medicare may terminate your Part B or Part D coverage if payments aren’t made on time. If you’re billed for IRMAA, it’s crucial to address the payment promptly to avoid losing coverage.
Automatic Deductions
IRMAA is usually deducted from your Social Security benefits if you’re receiving them. If not, you’ll be billed directly. Keeping track of these payments ensures your coverage remains active.
Preparing for Future IRMAA Changes
IRMAA thresholds and surcharges are subject to change annually, often in response to inflation or adjustments in Medicare policy. Staying informed about these changes can help you plan your finances accordingly. For example, the income brackets for 2025 reflect a slight increase over previous years, potentially affecting fewer people.
Stay Proactive
One way to stay ahead of potential IRMAA changes is by reviewing the Medicare & You handbook or checking updates from Medicare’s website. Being proactive helps you prepare for any adjustments that could impact your costs.
Adjusting Your Budget for IRMAA
If you’re subject to IRMAA, budgeting for these additional costs is essential. Including IRMAA charges in your retirement planning ensures you’re not caught off guard by higher premiums. Tools like retirement calculators and expense trackers can help you see the bigger picture.
Breaking Down the Costs
For those in the highest income brackets, IRMAA surcharges can add hundreds of dollars to monthly premiums. Allocating funds specifically for these expenses ensures you can maintain your coverage without financial strain.
Wrapping It All Up: Staying Ahead of IRMAA
IRMAA can significantly increase your Medicare costs if you’re in a higher income bracket, but it doesn’t have to be overwhelming. By understanding how IRMAA works, monitoring your income, and planning ahead, you can better manage these additional charges. Whether it’s through strategic financial planning, filing appeals for life changes, or budgeting effectively, taking control of your IRMAA situation ensures your Medicare costs stay manageable.
