Key Takeaways

1. If you have a high income, the Income-Related Monthly Adjustment Amount (IRMAA) can significantly impact your Medicare costs.

2. Understanding how IRMAA is calculated and what income thresholds apply in 2025 is essential to managing your Medicare expenses effectively.

What is IRMAA, and Why Does It Matter?

The Income-Related Monthly Adjustment Amount (IRMAA) is an extra charge added to your Medicare premiums if your income exceeds certain thresholds. It applies to Medicare Part B (medical insurance) and Part D (prescription drug coverage). This means if you earn above a specific limit, you’ll pay more for your Medicare coverage compared to others with lower incomes.

IRMAA is not a penalty; it’s based on your income and ensures higher-income beneficiaries contribute more to the Medicare program. For 2025, these thresholds have increased slightly due to inflation adjustments, making it even more critical to understand if and how IRMAA affects you.

1. IRMAA Is Based on Your Income from Two Years Ago

One key fact about IRMAA is that it’s determined by your Modified Adjusted Gross Income (MAGI) from two years prior. For example, in 2025, your IRMAA is calculated based on your 2023 tax return. This income includes:

• Wages and salaries

• Investment income (like dividends and interest)

• Capital gains

• Taxable Social Security benefits

• Retirement account distributions (excluding Roth IRAs)

If your income in 2023 exceeded the IRMAA thresholds, you’ll see higher Medicare premiums in 2025. This makes it essential to plan ahead and understand how today’s financial decisions might impact your future Medicare costs.

2. 2025 IRMAA Income Thresholds and Surcharges

For 2025, the IRMAA income thresholds are as follows:

• Individuals: $106,000 or more

• Married Couples Filing Jointly: $212,000 or more

Once your income exceeds these limits, IRMAA surcharges are added on top of the standard Medicare Part B and Part D premiums. The surcharges increase as your income rises, with several income brackets determining how much extra you’ll pay. These brackets are adjusted annually for inflation, so they may change slightly year to year.

The higher your income, the more you’ll pay. While the exact figures depend on your income bracket, IRMAA charges can significantly add to your overall healthcare costs. It’s worth noting that higher-income beneficiaries may also pay more for Part D plans.

3. You Can Appeal IRMAA if Your Income Changes

If your income has dropped since the year IRMAA is based on, you can request a reconsideration. This is especially important if your income decreased due to certain life events, such as:

• Retirement

• Divorce

• Death of a spouse

• Loss of a pension

To appeal, you’ll need to fill out the SSA-44 form, “Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event.” Be prepared to provide documentation supporting your claim, such as tax returns or proof of reduced income. If approved, the Social Security Administration (SSA) will adjust your IRMAA based on your current income.

Appealing IRMAA can save you hundreds or even thousands of dollars annually, so it’s worth pursuing if your financial situation has changed significantly.

4. How to Plan for IRMAA

Being proactive is key to minimizing the impact of IRMAA on your Medicare premiums. Here are some strategies to consider:

Optimize Retirement Account Withdrawals

Distributions from traditional IRAs and 401(k)s count toward your MAGI, potentially pushing you into a higher IRMAA bracket. Consider converting some of your savings to a Roth IRA, as withdrawals from Roth accounts do not count toward your MAGI.

Time Capital Gains Carefully

If you plan to sell investments, try to spread capital gains over multiple years to avoid a large spike in income. This can help keep your income below the IRMAA threshold.

Monitor Taxable Social Security Benefits

Up to 85% of your Social Security benefits may be taxable, depending on your total income. Work with a financial advisor to manage your income streams and reduce taxable benefits where possible.

Maximize Tax Deductions

Certain deductions can lower your MAGI, such as contributions to a health savings account (HSA) or charitable donations. Even small adjustments can help you stay below the IRMAA threshold.

5. IRMAA Is Reassessed Annually

One thing to keep in mind is that IRMAA isn’t a one-time determination. It’s reassessed every year based on your most recent tax returns. If your income fluctuates from year to year, your IRMAA charges may change accordingly.

For instance, if your income in 2023 was high but dropped in 2024, you might face IRMAA surcharges in 2025 but avoid them in 2026. Regularly reviewing your income and tax situation is essential to understand how it affects your Medicare costs.

You’ll receive a determination letter from the SSA if you’re subject to IRMAA. This letter outlines your income bracket and the additional amounts you’ll pay. Make sure to review this information for accuracy, as errors can lead to incorrect charges.

How IRMAA Affects Couples

If you’re married and file jointly, your combined MAGI determines whether you’ll face IRMAA charges. This can lead to higher premiums if your combined income exceeds the thresholds, even if one spouse earns significantly more than the other.

For couples considering filing taxes separately, keep in mind that lower thresholds apply to individuals filing separately. This can result in even higher IRMAA charges for each spouse, so consult with a tax advisor before making any changes to your filing status.

The Importance of Staying Informed

Medicare costs can feel overwhelming, especially when you factor in additional charges like IRMAA. However, staying informed and proactive can help you manage these expenses effectively. Review your tax returns, plan your income distributions carefully, and work with financial professionals to minimize your exposure to IRMAA.

If you’re nearing retirement or experiencing significant life changes, take the time to understand how these factors might influence your future Medicare costs. With careful planning, you can navigate IRMAA and make the most of your Medicare benefits.

Why IRMAA Awareness Pays Off

Understanding IRMAA is more than just knowing you’ll pay extra if you earn a higher income. It’s about taking control of your financial future and ensuring you’re not caught off guard by unexpected costs. By planning ahead, you can reduce the impact of IRMAA and keep more of your hard-earned money in your pocket.