Understanding Medicare IRMAA: What It Is and How to Plan for It
02/01/2025
When you become eligible for Medicare, one of the biggest surprises—especially for higher-income individuals—is something called IRMAA, which stands for Income-Related Monthly Adjustment Amount. If you’re new to Medicare or advising others about it, understanding IRMAA is critical to avoiding unexpected costs and making smart financial decisions.
What Is IRMAA?
IRMAA is a surcharge added to your monthly Medicare Part B (outpatient care) and Part D (prescription drug coverage) premiums if your income exceeds certain thresholds. In other words, the more you earn, the more you may pay for your Medicare benefits.
IRMAA applies to:
- Part B premiums (everyone pays a base amount, but IRMAA can increase this)
- Part D premiums (IRMAA is added on top of your plan’s premium)
This is not a penalty. Think of it as a means-tested adjustment that helps fund the Medicare program, based on your ability to pay.
How Is IRMAA Calculated?
The Social Security Administration (SSA) calculates IRMAA based on your modified adjusted gross income (MAGI) from two years prior. For example, in 2025, SSA will use your 2023 tax return to determine whether you owe IRMAA.
MAGI includes:
- Adjusted Gross Income (AGI)
- Plus: Tax-exempt interest (like municipal bond income)
There are income brackets set annually. If your income crosses into a higher tier, your Medicare premiums will increase. Here’s a general snapshot for 2025 (individual filers):
| MAGI (Single) | Monthly Part B Premium | Part D IRMAA |
|---|---|---|
| $106,000 or less | $185.00 (base) | $0 + your plan premium |
| $106,001–$133,000 | $259.00 | $13.70 + your plan premium |
| $133,001–$167,000 | $370.00 | $35.30 + your plan premium |
| $167,001–$200,000 | $480.90 | $57 + your plan premium |
| $200,001–$500,000 | $591.90 | $78.60 + your plan premium |
| Above $501,000 | $628.90 | $85.80 + your plan premium |
Note: These figures are adjusted annually and vary for joint filers.
What Triggers an IRMAA Review?
Each fall, Social Security reviews your IRS records and issues a Notice of Medicare Premium Payment Due (Form CMS-500) if you’re subject to IRMAA. You can also receive a Benefit Verification Letter showing the breakdown.
Can You Appeal IRMAA?
Yes! Many people successfully appeal IRMAA if their income has dropped significantly due to a life-changing event. You’ll need to complete Form SSA-44 and provide documentation.
Qualifying events include:
- Retirement or reduction in work
- Divorce or death of a spouse
- Loss of income-producing property
- Cessation of pension income
It’s crucial to act quickly. Once you receive the IRMAA notice, you generally have 60 days to request a reconsideration.
How to Plan Ahead and Minimize IRMAA
Even if you’re not currently subject to IRMAA, proper planning can help you avoid or reduce it in the future. Here’s how:
1. Work with a Financial Advisor or CPA
They can help you structure retirement income in a tax-efficient way, such as:
- Roth conversions (lower taxable income later)
- Strategic withdrawals from IRAs or 401(k)s
- Managing capital gains and tax-exempt interest
2. Consider Income Smoothing
Try to avoid large spikes in income from:
- Required Minimum Distributions (RMDs)
- Sale of assets or investments
- Inheritance distributions
- Sometimes spreading income over two years can keep you in a lower IRMAA tier.
3. Report Life Changes Promptly
If you’ve retired or had a significant income reduction, don’t wait for Social Security to catch up. File Form SSA-44 and submit supporting documents (e.g., retirement letter, new tax return).
4. Reassess Annually
Income fluctuates. We recommend clients revisit IRMAA status during annual financial reviews—especially as retirement income strategies change.