Medicare and IRMAA: What High Earners Need to Know

If your income is above certain thresholds, you'll pay more for Medicare Part B and Part D. This surcharge is called IRMAA—the Income-Related Monthly Adjustment Amount. Here's what you need to know.

What Is IRMAA?

IRMAA is an extra amount added to your Part B and Part D premiums if your income exceeds specified thresholds. Think of it as Medicare's way of asking higher earners to pay more of their own healthcare costs.

2025 IRMAA Income Thresholds

IRMAA is based on your Modified Adjusted Gross Income (MAGI) from two years ago. For 2025 premiums, Social Security uses your 2023 tax return.

Part B IRMAA

| Filing Status | Income | Monthly Premium | |--------------|--------|-----------------| | Single | $103,000 or less | $174.70 (standard) | | Single | $103,001-$129,000 | $244.60 | | Single | $129,001-$161,000 | $349.40 | | Single | $161,001-$193,000 | $454.20 | | Single | $193,001-$500,000 | $559.00 | | Single | Above $500,000 | $594.00 |

Married couples filing jointly have double these income thresholds.

Part D IRMAA

Part D IRMAA adds to your drug plan premium:

| Filing Status | Income | Monthly Surcharge | |--------------|--------|-------------------| | Single | $103,000 or less | $0 | | Single | $103,001-$129,000 | $12.90 | | Single | $129,001-$161,000 | $33.30 | | Single | $161,001-$193,000 | $53.80 | | Single | $193,001-$500,000 | $74.20 | | Single | Above $500,000 | $81.00 |

What Income Counts?

MAGI for IRMAA includes:

• Adjusted Gross Income from your tax return
• Tax-exempt interest income (municipal bonds)
• Certain foreign income

This means tax-free bond income, often used in retirement planning, still counts toward IRMAA thresholds.

Life-Changing Events: When You Can Appeal

If your income has dropped since the tax year being used, you may qualify for an IRMAA reduction. Qualifying life-changing events include:

• Marriage or divorce
• Death of a spouse
• Work stoppage (retirement, layoff)
• Work reduction
• Loss of income-producing property
• Loss of pension income
• Employer settlement payment

How to Appeal

1. Complete Form SSA-44 (Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event) 2. Provide documentation of the life-changing event 3. Submit to Social Security 4. If approved, your IRMAA will be based on current-year income

Strategies to Manage IRMAA

Roth Conversions Timing

Converting traditional IRA funds to Roth creates taxable income that triggers IRMAA. Consider:

• Spreading conversions over multiple years
• Timing conversions before Medicare enrollment
• Staying just below IRMAA thresholds

Qualified Charitable Distributions (QCDs)

If you're 70½ or older, QCDs from IRAs to charity don't count as income. This can reduce MAGI and potentially avoid or reduce IRMAA.

Capital Gains Management

Large capital gains in a single year can trigger IRMAA. Consider:

• Spreading gains over multiple years
• Tax-loss harvesting
• Timing sales strategically

Income Timing

If you have control over when you receive income (consulting, bonuses, business income), consider the IRMAA impact of timing decisions.

The Two-Year Look-Back

Remember: IRMAA uses income from two years ago. Planning needs to happen well in advance. Your 2025 retirement income decisions affect your 2027 IRMAA.

Is IRMAA Worth Avoiding?

Not always. The highest Part B IRMAA adds about $420/month or $5,040/year. If avoiding IRMAA requires reducing income by more than the tax savings, it may not be worth it. Work with a financial advisor to model the trade-offs.

The Bottom Line

IRMAA is a reality for higher-income Medicare beneficiaries, but understanding the thresholds and planning strategies can help manage these extra costs. The life-changing event appeal process provides relief when income drops unexpectedly.

Have questions about IRMAA and your Medicare costs? Our advisors can help you understand how income affects your Medicare premiums.