The US tax code is a progressive tax where the more you earn, the more tax you will pay. One progressive tax that affects retirees is the Income Related Monthly Adjustment Amount or IRMAA. IRMAA is an extra charge on Medicare premiums for people with higher incomes.
If your modified adjusted gross income (MAGI) from two years ago (2021 for tax year 2023) is above a certain amount, you are faced with an Income Related Monthly Adjustment Amount (IRMAA). This IRMAA is a surcharge you must pay in addition to the standard premiums.
The base Medicare Part D premium varies based on which plan you pick. However, Medicare Part B is a standard plan with a base price.
For 2023, the standard Medicare Part B premium is $230.80 (up from $170.10/mo. in 2022). This is up $60(!) per month or almost 40% from last year!!
While the base Medicare Part B premium is up $60/month from last year, the surcharge MAGI threshold income brackets barely moved! With recent inflation, this likely means more people will see more expensive Medicare premiums in 2023 than in prior years.
When you are faced with an IRMAA surcharge, you receive an Initial IRMAA Determination Notice from the Social Security Administration (SSA) in the mail. If you were working or did a large Roth conversion two years ago, then you are more likely to be issued with an IRMAA surcharge this year even though your current MAGI may be lower.
To avoid getting issued an IRMAA, you can proactively tell the SSA of any changes your income has seen in the past two years using a “Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event” form or by scheduling an interview with your local Social Security office (1-800-772-1213). Even if you are married, file jointly, and only had one spouse experience the precipitating event, both spouses should submit an individual appeal.
For example, if you were working at age 63, you will need to use the form to report your “Work Stoppage” before enrolling in Medicare when you turn 65. This is a common appeal to SSA that informs SSA that you had higher income due to working the previous 2 years, but you are now fully retired and your income has lowered significantly.
If your MAGI was higher in the past due to a Roth conversion, then the Social Security Administration will not remove the IRMAA.
To avoid or reduce IRMAA, you can:
- Inform Medicare if you’ve had a life changing event that affected your income, such as retirement, divorce, or death of a spouse.
- Avoid certain income-boosting changes to your annual income, such as selling property, withdrawing from retirement accounts, or taking a lump-sum pension (as cash vs. rollover).
- Utilize Medicare savings accounts, which are tax-advantaged accounts that can be used to pay for Medicare expenses.
- Use RMDs for charitable contributions, which are tax-free transfers of money from IRAs to qualified charities.
- Explore tax-free income streams, such as municipal bonds, life insurance, or annuities.
Below are the income brackets and associated IRMMA extra premium charges.
Medicare Part B And Part D Prescription Drug Coverage for Year 2023 IRMAA Tables
- Single, head–of–household, or qualifying surviving spouse with dependent child tax filing status
| If MAGI in 2021 (or 2020 if 2021 is not available) was: | Then the Part B Premium* is: | Prescription Drug Coverage Premium** is: |
| More than $97,000 but less than or equal to $123,000 | $230.80 | $12.20
+ Plan premium |
| More than $123,000 but less than or equal to $153,000 | $329.70 | $31.50
+ Plan premium |
| More than $153,000 but less than or equal to $183,000 | $428.60 | $50.70
+ Plan premium |
| More than $183,000 but less than $500,000
Greater than or equal to $500,000 |
$527.50
$560.50
|
$70.00
+ Plan premium
$76.40 + Plan Premium |
2. Married filing jointly tax filing status
| If MAGI in 2021 (or 2020 if 2021 is not available) was: | Then the Part B Premium* is: | Prescription Drug Coverage Premium** is: |
| More than $194,000 but less than or equal to $246,000 | $230.80 | $12.20
+ Plan premium |
| More than $246,000 but less than or equal to $306,000 | $329.70 | $31.50
+ Plan premium |
| More than $306,000 but less than or equal to $366,000 | $428.60 | $50.70
+ Plan premium |
| More than $366,000 but less than $750,000
Greater than or equal to $750,000 |
$527.50
$560.50 |
$70.00
+ Plan premium
$76.40 + Plan Premium |
- Married filing separately tax filing status
| If MAGI in 2021 (or 2020 if 2021 is not available) was: | Then the Part B Premium* is: | Prescription Drug Coverage Premium** is: |
| More than $97,000 but less than $403,000
Greater than or equal to $403,000 |
$527.50
$560.50 |
$ 70.00
+ Plan premium
$76.40 + Plan Premium |