If you’re enrolled in Medicare, you may have heard the term IRMAA, which stands for Income-Related Monthly Adjustment Amount. It’s an extra charge that some Medicare beneficiaries pay in addition to their standard Part B (medical insurance) and Part D (prescription drug) premiums.
Put simply, IRMAA is a surcharge based on your income. It’s designed to have higher-income retirees contribute a bit more toward the cost of their Medicare coverage.
How IRMAA Is Calculated
Each year, the Social Security Administration (SSA) looks at your Modified Adjusted Gross Income (MAGI) from two years prior to decide whether IRMAA applies.
For example, your 2025 income will determine your 2027 Medicare premiums.
If your income is above a certain threshold, you’ll pay higher monthly premiums for both Parts B and D. These higher costs are called IRMAA surcharges.
IRMAA Income Thresholds – 2025 premiums based on 2023 MAGI
- Individuals: IRMAA begins when MAGI exceeds $106,000
- Married couples filing jointly: IRMAA begins when MAGI exceeds $212,000
The more your income exceeds these thresholds, the higher your monthly Medicare premiums will be. IRMAA is divided into several income tiers, and each tier increases your Part B and D costs by a set amount.
What Counts Toward MAGI
Your Modified Adjusted Gross Income includes most types of income, such as:
- Wages and self-employment income
- Pension and annuity payments
- Required Minimum Distributions (RMDs) from retirement accounts
- Interest and dividends
- Capital gains from investments or real estate sales
- Tax-exempt interest (like from municipal bonds)
Essentially, any taxable or reportable income can influence whether you owe IRMAA.
Why IRMAA Matters
Many retirees are surprised when their Medicare premiums increase — sometimes by hundreds of dollars per month — because of income reported two years earlier. Even a one-time event such as selling a property, taking a large IRA withdrawal, or realizing investment gains can temporarily raise premiums for the following year.
If your income later decreases due to retirement, job loss, or another qualifying life event, you can ask the Social Security Administration to reconsider your IRMAA determination by filing Form SSA-44.
The Bottom Line
IRMAA isn’t a penalty — it’s an income-based adjustment tax that helps fund Medicare. But knowing how it works can help you understand your healthcare costs and anticipate potential changes in your premiums.
Staying aware of how income decisions today affect future Medicare costs is one more way to stay informed and confident in your retirement planning.
If you have any questions on how IRMAA may affect you, give us a call!
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