Medicare premiums are a major part of retirement healthcare costs. Most retirees qualify for premium-free Part A and pay the standard premium for Medicare Part B and Part D. But higher-income individuals may have to pay extra. This extra cost is called the Income-Related Monthly Adjustment Amount, or IRMAA.
Understanding how IRMAA works and how to determine whether you’ll owe it helps in planning your retirement budget and possibly allows you to identify ways to manage or reduce it.
How do I know if I have to pay IRMAA?
You’ll know you have to pay IRMAA if your income exceeds certain thresholds set by Medicare. Each year, the Social Security Administration (SSA) looks at your tax return from two years prior to determine whether you must pay this extra charge.
For example, your 2026 IRMAA will be based on your 2024 tax return. If your income crosses the threshold for your filing status, you’ll receive a notice from SSA explaining the additional amount that will be added to your monthly Medicare premiums.
This means you have to think ahead. Actions you take today like Roth conversions, harvesting capital gains, or taking retirement account withdrawals could affect whether you pay IRMAA two years down the road.
IRMAA limits for 2025
The exact income thresholds for IRMAA change each year due to inflation adjustments, and are typically announced in October. If your income exceeds these amounts, IRMAA kicks in at various tiers. The more your income surpasses the threshold, the higher the adjustment to your monthly premium. For 2025, here are the income limits for Medicare Part B and Part D premiums:
| Tier | Single MAGI | Married Filing Jointly | Part B | Part D |
| Base Premium | $106,000 or less | $212,000 or less | $185 | $0 |
| Tier 1 | $106,001 – $133,000 | $212,001 – $266,000 | $259 | $13.70 |
| Tier 2 | $133,001 – $167,000 | $266,001 – $334,000 | $370 | $35.30 |
| Tier 3 | $167,001 – $200,000 | $334,001 – $400,000 | $480.90 | $57.00 |
| Tier 4 | $200,001 – $499,999 | $400,001 – $749,999 | $591.90 | $78.60 |
| Tier 5 | $500,000 or more | $750,000 or more | $628.90 | $85.80 |
Is IRMAA based on AGI or taxable income?
Well… neither! Unfortunately, it isn’t as simple as pulling a number off of your tax return. Neither your AGI or taxable income determine IRMAA. Instead, it’s based on a measure called modified adjusted gross income, or MAGI, which is exactly what it sounds like. You start with AGI, but you alter it. MAGI also influences many other credits, deductions, and phaseouts.
This value does not appear on your tax return, you must calculate it yourself. To further add to the confusion and frustration there isn’t just one way to calculate MAGI. Instead, nearly each use of MAGI has its own formula. In other words, you modify AGI differently depending ont he reason you are using it. For example, each of the following are all based on MAGI, and each have their own formula:
- Whether you qualify for the Saver’s credit
- Net Investment Income Tax
- Qualification for Roth IRA contributions
- Deductibility of regular IRA contributions
There are others too, but you get the idea.
How to Calculate MAGI for IRMAA
For IRMAA purposes, MAGI starts with your adjusted gross income (AGI) and then adds back tax-exempt interest (like municipal bond interest)
In short, MAGI for IRMAA is AGI+tax-exempt interest. This broader measure means you may owe IRMAA even if much of your income isn’t traditionally taxed.
For example, someone living off significant tax-free municipal bond interest might assume they are under the threshold. But once that income is added back in for MAGI, they could find themselves facing an unexpected IRMAA charge.
Does IRMAA apply to both spouses?
Yes. IRMAA is applied per person, not per household. This means that if you and your spouse are both enrolled in Medicare Part B and Part D, and your joint income exceeds the threshold, you will each pay the additional amount.
For example, if your IRMAA adjustment is $74 per month, both you and your spouse will each pay $74, for a total of $148 added to your monthly premiums. This makes IRMAA planning especially important for married couples, as the combined cost can be significant.
FAQs About IRMAA
Here are some common questions we hear from clients about IRMAA:
- How can I avoid paying IRMAA?
You can potentially avoid or reduce IRMAA through tax planning strategies like Roth conversions, charitable giving from IRAs (QCDs), and careful timing of capital gains. - Does IRMAA go away if my income drops?
Yes, but you need to notify the SSA. If your income falls due to a qualifying life event such as retirement or the death of a spouse, you can file Form SSA-44 to request a reduction. - Can IRMAA be appealed?
Absolutely. Many retirees successfully appeal IRMAA by showing documentation of a qualifying event or corrected income figures. - Is IRMAA charged monthly or annually?
IRMAA is charged monthly and added directly to your Medicare Part B and Part D premiums. - What if I’m not sure how close I am to the IRMAA limit?
You can estimate your MAGI by adding up all of your income and tax-exempt interest.
To get help from a fee-only fiduciary and make sure that tax efficiency is a part of your retirement plan, email me at [email protected] or call 903-471-0624 and I’d be glad to help you.
