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People who earn over $97,000 and couples who make over $194,000 have to pay an extra fee called an income-related monthly adjustment amount (IRMAA) on top of their Medicare Part B and Part D premiums. The surcharge works on a sliding scale, and it applies to both Original Medicare and Medicare Advantage plans.
The federal government determines if you're required to pay an IRMAA by looking at your tax returns from two years ago. You can appeal your IRMAA status if your financial circumstances have shifted in the past two years. Currently, only 7% of Americans are required to pay an IRMAA.
What is an IRMAA?
High-earning Medicare beneficiaries have to pay an IRMAA, an extra charge on Medicare Parts B and D. The fee kicks in if you make more than $97,000 or if you and your spouse collectively earn over $194,000.
The IRMAA is calculated on a sliding scale with five income brackets topping out at $500,000 and $750,000 for individual and joint filing, respectively. These figures change annually with inflation.
IRMAA calculations have a two-year lag time. Whether you must pay an IRMAA in 2023 depends on your 2021 tax returns.
What are the IRMAA brackets for 2023?
The IRMAA income brackets for 2023 start at $97,000 for a single filer and $194,000 for a married couple. Which bracket you fall into depends on your modified adjusted gross income (MAGI).
For most people, modified-adjusted gross income is more or less the same as adjusted gross income (AGI). If your income places you on the borderline for IRMAA or if you routinely make significant deductions, it's worth calculating your MAGI.
IRMAA brackets for 2023 with monthly IRMAA surcharges by Medicare plan type
2021 income (single/joint)
The government adjusts income brackets every year to reflect changes in the cost of living. Whether you have Medicare Part D coverage plays into your final bill.
All Medicare beneficiaries who have a MAGI above $97,000 (individual) or $194,000 (joint) have to pay a Part B surcharge. However, you only have to pay a Part D surcharge if you have a Part D policy or if you have a Medicare Advantage plan with prescription drug coverage.
How to avoid an IRMAA
You can avoid paying an IRMAA either by reducing your taxable income or by making an appeal to the Social Security Administration (SSA). Reducing your taxable income is the best method for those trying to avoid an IRMAA in the future. You can also appeal an IRMAA decision directly with the SSA.
Reduce your taxable income
You can take steps to reduce future IRMAA payments by lowering your taxable income. For example, switching from an IRA to a Roth IRA while you're still working means you'll pay more in income taxes now, and less in retirement when you'll be eligible for Medicare.
Remember, your IRMAA is based on your income taxes from two years ago. Steps you take to lower your taxable income in 2023 won’t affect your IRMAA requirement until 2025.
If you're still working, but you want to take steps now to lower your post-retirement income, consider using a Roth IRA and Roth 401(k). You pay taxes on a Roth IRA or 401(k) now. In exchange, you can receive tax-free distributions in retirement.
If you're already retired, you can still take a few steps to lower your taxable retirement income, and possibly head off an IRMAA requirement.
- Use a tax loss harvesting strategy to reduce your annual tax bill
- Make qualified charitable contributions directly through your IRA
- Take your Social Security payments before age 72 to lower your annual retirement income
Make an appeal
If your life circumstances have changed dramatically in the last two years, you can file an appeal to eliminate or reduce your IRMAA payment. The Social Security Administration (SSA) maintains a list of common qualifying events, such as marriage and job loss, on its website.
- Death of a spouse
- Work stoppage
- Job loss
- Income reduction
- Pension loss
- Loss of a rental property
Call the Social Security Administration at 800-772-1213 if you’ve experienced two or more qualifying events. Otherwise, you can use the SSA-44 form, available on the Social Security Administration website, to appeal your IRMAA status by mail or fax.
How does the IRMAA work?
You don’t need to opt in or sign up for the IRMAA. If you are required to pay a surcharge, the Social Security Administration (SSA) will send you a letter alerting you to the higher cost. Your contribution amount is automatically added to your Part B premium, which is then deducted from your Social Security payments.
If you’ve chosen to delay receiving Social Security, you can pay online through the Social Security Administration website. You can pay for both your ordinary Medicare premiums and your IRMAA surcharge through a bank account transfer or with a debit or credit card.
Part B immunosuppressive drug coverage
Medicare covers kidney transplants for people suffering from end-stage renal disease regardless of age. If you're under 65, however, Medicare only covers vital immunosuppressive drugs for 36 months after the operation.
Beginning this year, you can continue to receive Medicare Part B coverage specifically for immunosuppressive drugs even if you no longer qualify for Medicare Part B. However, to access your monthly prescription you must pay a premium of $97.10 per month, plus an IRMAA surcharge if you're a high-earner.
Part B immunosuppressive drugs
2021 income (single/joint)
Frequently asked questions
What is an IRMAA?
An IRMAA is a fee that’s added to your Medicare Part B and Part D rates when your income exceeds a certain threshold. The IRMAA surcharge operates on a sliding scale, so you pay more as your income increases.
Does the IRMAA apply to Medicare Advantage plans?
Yes, an IRMAA applies to both Original Medicare and Medicare Advantage (also known as Medicare Part C). The IRMAA surcharge applies to Part B, Part D and Medicare Advantage with prescription drug coverage.
What tax year are 2023 Medicare IRMAA rates based on?
Your IRMAA for 2023 is based on your tax filings from 2021. The government uses a two-year lag time when determining IRMAA requirements for Medicare recipients.
Information from several government sources was used in this analysis. SSA.gov provided a list of qualifying life events that allow for an IRMAA appeal. Income data came from the Centers for Medicare and Medicaid Services, and IRS.gov supplied details about deduction eligibility for charitable contributions.