Finance · Taxes
Medicare Costs and IRMAA
How income-related Medicare surcharges work, the IRMAA brackets, and planning strategies to stay below thresholds.
- Medicare Costs and IRMAA
- Medicare Costs and IRMAA Guide
- Medicare Costs and IRMAA Tips
- Medicare Costs and IRMAA Tutorial
- Medicare Costs and IRMAA Reference
- 01IRMAA surcharges can add up to $594 per month per person to your Medicare Part B premium in 2025.
- 02IRMAA is based on your MAGI from two years prior — a large income event in 2023 affects 2025 premiums.
- 03Roth conversions, QCDs, and income timing strategies can help you stay in lower IRMAA brackets.
Medicare Part B and D Premiums
Medicare Part B covers outpatient services and medical equipment. Part D covers prescription drugs. Both have monthly premiums that most enrollees pay directly from their Social Security benefit or by invoice.
| Coverage | Standard 2025 Premium | Notes |
|---|---|---|
| Part A (hospital) | $0 for most | Free if you paid Medicare taxes 40+ quarters |
| Part B (medical) | $185.00/month | Higher-income enrollees pay more via IRMAA |
| Part D (drugs) | Varies by plan (~$46 avg) | IRMAA adds a surcharge on top of plan premium |
| Part B deductible | $257/year | Applies before Medicare begins paying |
Most Medicare enrollees pay only the standard premium. However, higher-income beneficiaries face the Income-Related Monthly Adjustment Amount (IRMAA), which adds a surcharge on top of the standard premium.
What IRMAA Is
IRMAA (Income-Related Monthly Adjustment Amount) is an additional premium surcharge applied to Medicare Part B and Part D for beneficiaries whose income exceeds certain thresholds. It was designed so that higher-income retirees pay a greater share of the actual cost of Medicare coverage.
- IRMAA is not means-tested at enrollment — it is calculated automatically by the Social Security Administration (SSA) based on your IRS tax return.
- The SSA uses your Modified Adjusted Gross Income (MAGI) from two years prior (the look-back period). Your 2025 premiums are based on your 2023 MAGI.
- IRMAA affects you whether you have Original Medicare or a Medicare Advantage plan.
Warning: A one-time income spike — such as a Roth conversion, home sale, or RMD in a high-earnings year — can push you into a higher IRMAA bracket two years later even if it never happens again.
2025 IRMAA Income Brackets
IRMAA brackets are adjusted for inflation annually. The table below shows 2025 monthly Part B premiums by income bracket based on 2023 MAGI.
| 2023 MAGI (Individual) | 2023 MAGI (MFJ) | Part B Monthly | Part D Monthly Surcharge |
|---|---|---|---|
| ≤ $106,000 | ≤ $212,000 | $185.00 | $0 |
| $106,001–$133,000 | $212,001–$266,000 | $259.00 | $13.70 |
| $133,001–$167,000 | $266,001–$334,000 | $370.00 | $35.30 |
| $167,001–$200,000 | $334,001–$400,000 | $480.90 | $57.00 |
| $200,001–$500,000 | $400,001–$750,000 | $591.90 | $78.60 |
| Above $500,000 | Above $750,000 | $628.90 | $85.80 |
A married couple both on Medicare in the top bracket could pay over $1,257/month in Part B premiums alone — roughly $15,000 per year more than the standard premium.
How IRMAA Is Calculated
The SSA calculates IRMAA using your MAGI, which for Medicare purposes is your AGI plus tax-exempt interest income (the same definition used for ACA subsidy calculations).
Income included in Medicare MAGI:
- Wages, salaries, self-employment income
- Taxable Social Security benefits
- IRA and 401(k) distributions (including RMDs)
- Capital gains (short and long-term)
- Tax-exempt municipal bond interest
- Roth conversions
Income not counted: Roth IRA withdrawals (after the account is 5 years old and owner is 59½), health savings account (HSA) distributions for qualified expenses, and life insurance proceeds.
Tip: If your income was unusually high in the look-back year due to a one-time event, you can appeal IRMAA using Form SSA-44 (Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event). Qualifying events include retirement, divorce, and death of a spouse.
Planning Strategies to Avoid Surcharges
The cliff structure of IRMAA brackets means that one dollar over a threshold can cost thousands per year. Managing income strategically in the years before Medicare enrollment (age 65) and each year afterward is essential.
| Strategy | Effect on MAGI | Best Used |
|---|---|---|
| Roth conversions in early retirement | Raises MAGI now, lowers future RMDs | Ages 60–64 before Medicare |
| Qualified Charitable Distributions (QCDs) | Reduces AGI (satisfies RMD) | Age 70½+, on Medicare |
| Harvest capital losses | Offsets capital gains | Any year with gains |
| Delay asset sales to straddle years | Spreads large gain across two years | Real estate, business sales |
| HSA contributions | Reduces AGI (above-the-line deduction) | Pre-Medicare enrollment |
Run income projections two years forward when planning large taxable events. Crossing a bracket threshold by just $1 can cost a couple $2,000 or more per year in higher premiums.