Retirees on Medicare are finding out the hard way that there is yet another tax on their income which is IRMAA. The question that many have is “does IRMAA include Social Security?”
The answer to this question is murky at best as yes IRMAA does include Social Security, but it does all depend on your ither income.
What is IRMAA?
IRMAA, which is short for Medicare’s Income Related Monthly Adjustment Amount, is a surcharge on top of your current Medicare Part B and Part D premiums if you are earning too much money.
IRMAA is simply a tax on your income, but you do have to qualify for it.
Who does IRMAA impact?
IRMAA can only impact Medicare beneficiaries who are in:
- Medicare Part B and/or,
- Medicare Part D (stand-alone drug plan) or,
- Medicare Advantage Plan with or without drug coverage and,
- Whose income also exceeds certain thresholds.
You must be in certain Medicare health coverage plans and also have a certain amount of income to be in IRMAA.
Does IRMAA include Social Security?
Social Security.gov defines income for IRMAA as your adjustable gross income plus any tax-exempt interest you may have or everything on lines 2a and 11 of the 2022 IRS form 1040.
So, the answer is yes, IRMAA does include Social Security, but only the taxable portion of your benefit.
If your income comes from retirement savings that are not on lines 2a and 11 of your 2022 IRS form 1040 then there is a high probability that your Social Security will not count towards IRMAA.
It all comes down to if your Social Security benefit is taxable of not.
Some examples of which retirement vehicles that you can use that generate an income that will not count towards IRMAA or will work against you with the taxation of your Social Security benefits are:
- Roth Accounts.
- Life Insurance,
- Certain Non-Qualified Annuities.
- Health Savings Accounts (HSA’s).
- 401(h) Plans.
- Loans from your primary residence.
On the other hand, though if your income in retirement derives from tax-deferred investment vehicles like Traditional IRA’s and 401(k)’s then there is a very high probability that IRMAA will include your Social Security as your benefit will most likely be taxable.
When it comes to IRMAA including Social Security benefits it all really comes down to how you saved for retirement.
If you pay taxes today on your saving then tomorrow you will not be subject to IRMAA at any point, BUT, if you delay paying those taxes until later not only will IRMAA come into play your Social Security benefit will be taxable.
The choice is now yours whether to worry about IRMAA later or have it never cross your mind.