Key Takeaways:

1. IRMAA (Income-Related Monthly Adjustment Amount) adds extra costs to your Medicare premiums based on your income level, and it can significantly impact your budget.

2. Understanding the timelines, how income is calculated, and the potential for appeals can help you plan more effectively for your Medicare coverage.

What Is IRMAA, and How Does It Affect Your Medicare Premiums?

The Income-Related Monthly Adjustment Amount (IRMAA) is an additional charge on your Medicare Part B and Part D premiums if your income exceeds certain thresholds. These thresholds are set by the federal government and are based on your Modified Adjusted Gross Income (MAGI) from two years prior. In 2025, this means your 2023 tax returns are used to calculate your IRMAA.

IRMAA can significantly increase your monthly Medicare costs, so it’s essential to know how it works and whether it applies to you. The extra amount is added automatically, and you’ll receive a letter from the Social Security Administration (SSA) informing you of any adjustments. Planning ahead is critical to avoid surprises.

Who Is Subject to IRMAA?

Not everyone pays IRMAA. If your income is below the annual thresholds, you’ll pay the standard Medicare premium amounts. However, if your income exceeds these limits, IRMAA kicks in. For 2025, the thresholds start at $106,000 for individuals and $212,000 for couples filing jointly. These limits are adjusted annually to account for inflation.

If your income is just over the threshold, you’ll fall into the first IRMAA tier, with the lowest increase in premiums. Higher income means higher IRMAA charges, so understanding where you stand is key to effective planning.

How Is IRMAA Calculated?

The SSA calculates IRMAA using your MAGI, which includes your adjusted gross income (AGI) plus any tax-exempt interest. They review this information from your IRS tax return two years prior. For example, if you’re planning for your 2025 Medicare premiums, your 2023 MAGI is the determining factor.

There are five IRMAA tiers, each corresponding to a specific income range. The higher your income, the higher the adjustment amount added to your Part B and Part D premiums. This calculation process can feel complex, so knowing your MAGI and staying under certain thresholds, if possible, can save you money.

What Income Sources Count Toward IRMAA?

Understanding what counts as income for IRMAA purposes can help you make informed decisions about your finances. The following sources contribute to your MAGI:

• Wages and salaries

• Social Security benefits (taxable portion)

• Dividends, interest, and capital gains

• Retirement account withdrawals (e.g., IRAs, 401(k)s)

• Rental income

• Tax-exempt interest (such as municipal bonds)

If you anticipate crossing an IRMAA threshold, consider working with a financial advisor to explore strategies to lower your MAGI, such as Roth conversions, charitable contributions, or delaying withdrawals.

Can IRMAA Be Appealed?

Yes, you can appeal IRMAA if you believe it has been applied in error or if you’ve experienced a life-changing event that significantly reduced your income. Some of the most common qualifying life events include:

• Retirement or reduced work hours

• Divorce or death of a spouse

• Loss of pension income

• Settlement of property or other one-time income adjustments

To appeal, you’ll need to file Form SSA-44 (Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event). Be prepared to provide documentation supporting your case, such as tax returns, employer statements, or legal documents. The appeal process can take time, so act promptly if you think you’re eligible.

When Do You Start Paying IRMAA?

IRMAA charges begin as soon as you enroll in Medicare Part B and/or Part D and your income exceeds the thresholds. Typically, IRMAA applies in the calendar year following the assessment of your income. For instance, if your 2023 MAGI exceeds the limits, you’ll pay IRMAA on your 2025 premiums.

You’ll receive an annual notice from the SSA detailing your IRMAA determination and payment amounts. Keep an eye on these letters, as they outline your costs and explain how to appeal if necessary.

How Does IRMAA Impact Couples Filing Jointly?

If you’re married and file taxes jointly, your combined MAGI determines whether IRMAA applies. This means even if only one of you has a higher income, both may be subject to IRMAA charges on your Medicare premiums. For 2025, the joint threshold starts at $212,000, so careful financial planning as a couple is essential.

Strategies such as managing withdrawals from retirement accounts or timing capital gains can help lower your joint income and avoid crossing an IRMAA tier.

What Happens If Your Income Fluctuates Year-to-Year?

Your IRMAA charges are recalculated annually based on the latest available tax information. If your income fluctuates significantly, your IRMAA amount can change from one year to the next. This is especially common for retirees transitioning from work to retirement, when income levels may drop substantially.

If your income decreases, you can request a reassessment by contacting the SSA and providing updated tax information. This process ensures your Medicare premiums reflect your current financial situation and not outdated income data.

How Can You Plan Ahead to Manage IRMAA Costs?

Planning is your best tool for managing or avoiding IRMAA. Here are some strategies to consider:

1. Understand the thresholds: Keep track of annual income limits and how they may affect your Medicare costs.

2. Time your income: Spread out capital gains, bonuses, or other income to avoid crossing a threshold in any given year.

3. Maximize tax-advantaged accounts: Use Roth IRAs or Health Savings Accounts (HSAs) to minimize taxable income.

4. Charitable giving: Donating to qualified charities can lower your MAGI and potentially save you from IRMAA charges.

5. Review annually: Regularly assess your income and tax situation to anticipate any changes in IRMAA charges.

Working with a financial advisor who understands Medicare’s nuances can make navigating IRMAA much smoother.

Taking Control of Your Medicare Premiums

IRMAA can feel like an added layer of complexity, but understanding how it works empowers you to make smarter financial decisions. Whether you’re already enrolled in Medicare or planning ahead, staying informed about income thresholds, appeal options, and financial strategies can help you manage these extra costs effectively.