Key Takeaways

• In 2025, Medicare premiums rise sharply if your income exceeds specific thresholds, even if the increase was a one-time event from two years ago.

• The Income-Related Monthly Adjustment Amount (IRMAA) can cause significant increases in your monthly Medicare Part B and Part D premiums.

Why Your Income from Two Years Ago Matters in 2025

Medicare doesn’t base your premiums on your current income. Instead, it looks at your modified adjusted gross income (MAGI) from two years earlier. That means your 2025 premiums are based on your 2023 tax return.

Even if your income dropped dramatically in 2024 or 2025—due to retirement, job loss, or other life changes—you could still be charged higher premiums today if your 2023 income crossed an IRMAA threshold.

This lag often feels unfair because you’re being charged now for earnings you’re no longer receiving. The intent is to match premiums with income, but the delayed system creates problems for people whose financial situations have changed.

What Is IRMAA?

The Income-Related Monthly Adjustment Amount (IRMAA) is an additional charge added to your Medicare Part B and Part D premiums if your income exceeds certain thresholds.

For 2025, IRMAA applies if your 2023 MAGI is:

• Over $103,000 for individuals

• Over $206,000 for joint filers

These figures are indexed to inflation and have risen from the 2024 limits of $97,000 and $194,000 respectively.

If your income is just a dollar above these thresholds, you enter a higher premium bracket. And the jump in cost can be substantial.

The Tiers Matter

IRMAA isn’t a gradual scale. It’s a set of cliffs. Cross the line, and your premium spikes significantly.

In 2025, there are five income brackets that determine how much extra you’ll pay. Each higher bracket leads to an increase in both Part B and Part D premiums.

So, an income of $103,001 could place you in a higher premium tier than someone making $103,000—even though the difference in income is just one dollar.

How Much More Will You Pay?

While we’re not listing exact dollar amounts tied to private plans, it’s important to understand that:

• Part B standard premiums rise based on income brackets, with IRMAA adjustments added on top.

• Part D premiums also increase as you move up the income scale.

In some cases, the total increase could be hundreds of dollars more per month, especially for those in the highest IRMAA tier.

And this extra charge continues for the entire calendar year, unless you successfully appeal.

What Counts Toward MAGI?

Modified Adjusted Gross Income (MAGI) includes:

• Wages and salaries

• Self-employment income

• Required minimum distributions from retirement accounts

• Capital gains

• Dividends and interest

• Rental income

It also includes tax-exempt interest and foreign income. So, even if you thought something wasn’t taxable, it might still push your MAGI high enough to trigger IRMAA.

One-Time Events Can Haunt You

Many retirees experience a high-income year right before retirement due to:

• Severance pay

• Stock sales

• Business wind-down income

• Large withdrawals from retirement accounts

Even if your income dropped dramatically in 2024, the 2023 spike can trigger a full year of higher premiums in 2025.

This is why some people find themselves suddenly paying significantly more for Medicare, even though they are now on a reduced, fixed income.

Can You Appeal an IRMAA Decision?

Yes. The Social Security Administration (SSA) allows you to request a reconsideration if you’ve experienced a life-changing event that reduced your income. Acceptable events include:

• Retirement or reduced work hours

• Marriage or divorce

• Death of a spouse

• Loss of income-producing property

• Loss of pension income

• Employer settlement payment termination

To file an appeal, you must complete Form SSA-44 and provide documentation of the event. Examples include a retirement letter, recent tax return, or income statements.

How Quickly Will the SSA Respond?

Typically, SSA responds within 60 days of receiving your request. If they approve your appeal, your premiums will be adjusted retroactively, and you may be reimbursed for excess charges already paid.

However, it’s essential to submit your appeal early in the year. Delays can lead to several months of overpayment that you’ll need to wait to reclaim.

Strategies to Avoid IRMAA Penalties

If you’re approaching retirement or a year when your income may spike, here are some proactive ways to minimize IRMAA:

1. Time Your Withdrawals

If you have control over when you take income—like from a traditional IRA or 401(k)—consider delaying or splitting distributions to stay below the IRMAA threshold.

2. Use Roth Accounts Where Possible

Qualified withdrawals from Roth IRAs are not included in MAGI. Shifting some retirement savings to Roth accounts could reduce your reportable income in future years.

3. Charitable Contributions from IRAs

If you’re age 70½ or older, you can make a Qualified Charitable Distribution (QCD) from an IRA. These distributions do not count toward your MAGI but still satisfy your required minimum distribution.

4. Spread Capital Gains Across Years

If you plan to sell stocks or property, consider spreading the sale over multiple tax years to avoid a sudden spike in income.

5. Avoid Non-Essential Conversions

While converting traditional retirement accounts to Roth IRAs can be beneficial long-term, doing so in large amounts can temporarily increase your MAGI and push you into a higher premium bracket.

What If You’re Already in a Higher IRMAA Tier?

If your income will remain high and an appeal won’t apply, plan your finances around these higher costs. Review your:

• Healthcare budget

• Retirement income strategy

• Spouse’s income (if filing jointly)

Because IRMAA resets every year based on income from two years prior, it’s possible your premiums may drop in 2026 if your 2024 income was lower.

Medicare Advantage and IRMAA

Even if you enroll in a Medicare Advantage plan, IRMAA still applies. It’s paid directly to Medicare, not the plan. That means switching to a different type of Medicare coverage won’t help you avoid IRMAA charges.

This applies to all types of plans that include Part B and/or Part D services.

Keep an Eye on Future Thresholds

Each year, the income brackets for IRMAA are adjusted based on inflation. A modest increase in income could suddenly push you into a higher tier if the brackets don’t rise enough.

Reviewing your annual income and estimating how it will affect your future premiums can help you avoid surprises. It’s especially important if you’re:

• Selling property

• Taking lump sum payouts

• Retiring soon

Being aware of where you stand relative to the thresholds gives you more control.

Medicare Isn’t Always One-Size-Fits-All

Medicare is a standardized program, but your costs are far from standardized. IRMAA adds a layer of complexity that ties your healthcare premiums to your income.

Because IRMAA charges can last for a full year—and be based on an income you no longer earn—it’s critical to:

• Monitor your MAGI

• Appeal if eligible

• Plan income distributions with Medicare premiums in mind

Working with a financial advisor or a licensed agent listed on this website can help you evaluate your situation and explore strategies tailored to your needs.

When Income Surprises Lead to Higher Medicare Costs

If you’re facing IRMAA in 2025, it might feel frustrating—especially if the income triggering it was temporary. But understanding the system, knowing your appeal rights, and planning future income wisely can reduce or even eliminate the impact.

To explore your Medicare options or get help understanding how income affects your coverage, reach out to a licensed agent listed on this website.