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Medicare’s Income Related Monthly Adjustment Amount (IRMAA) is a surcharge for Medicare beneficiaries who generate too much income.
The surcharge increases the premiums of Medicare Part B and Part D coverage.
The Income Related Monthly Adjustment Amount is a tax on your income through Medicare.
What is income for IRMAA:
According to Social Security income for IRMAA is:
Modified Adjusted Gross Income *MAGI)
MAGI by definition is adjusted gross income (AGI) plus any tax-exempt interest or everything on lines 2a and 11 of the 2022 IRS Tax form 1040.
Some examples of income are:
Wages, Taxable Social Security benefits, Interest, Rental and Pension Income, Capital Gains, Dividends and withdrawals from Traditional 401(k)’s, IRA’s, SEP’s or Qualified Annuities.
What does not count as income:
Roth Accounts, Life Insurance, Certain Annuities, Health Savings Accounts (HSA’s), 401(h) plans and home equity (loans).
What are the surcharges?
The initial surcharge starts at roughly 40% more of the standard Part B and D premium and can be as high as 260%.
Typically, there are 5 different income thresholds within IRMAA which start at $97,000 for individuals and $194,000 for couples with a joint tax status.
Process determining IRMAA:
The Social Security Administration request MAGI data of all Medicare beneficiaries electronically from the IRS which uses tax-returns from 2 years prior.
For example, 2023 IRMAA determinations use 2021 income tax return information.
Note: anyone receiving financial help in affording Medicare premiums will not be subject to IRMAA
Paying for this surcharge
Social Security benefits automatically pay any surcharges. If a person is not receiving Social Security a bill is sent to them directly, typically, on a quarterly basis.