What to Know - Medicare Premium "IRMAA"

It is that time of year again when the Social Security Administration reviews your Medicare premium costs and alerts you of any changes.

Certain income levels allow an adjustment to your Medicare premiums, called an “Income-Related Monthly Adjustment Amount” (IRMAA). According to the U.S. Centers for Medicare & Medicaid Services, 8% of all Part B beneficiaries are subject to an adjustment.

If there is an adjustment, you will be notified in November of this year of your premium costs for the next year.

If you disagree with a premium adjustment, see below - you have the right to appeal the decision, but you must have experienced (1) a reduced income plus (2) a qualifying "life-changing event". If so, you typically have 60 days to submit an appeal, so let's connect today to review your options.

Call now, or schedule a Quick Connection time with us today at www.openwindowFS.com/connection.

Surprised to receive an IRMAA letter? 

If you're surprised to receive this letter, you're not alone. Premium adjustments arrive unsolicited by mail each November.

The Social Security Administration uses the data you've submitted to the Internal Revenue Service on your tax return. They run your information through a computer and then apply whatever information comes out to a government form letter notifying you of a premium adjustment. The Initial IRMAA Determination Letter can be vague while referring to higher costs. No one likes uncertainty in that regard!

Premium adjustments are two years behind.

The income used to determine your Medicare premium IRMAA is your adjusted gross income plus tax-exempt interest (such as municipal bond interest) from two years ago. 

Your 2024 income determines your IRMAA in 2026.

Your 2023 income determines your IRMAA in 2025.

Your 2022 income determines your IRMAA in 2024.

Your 2021 income determines your IRMAA in 2023.

Your 2020 income determines your IRMAA in 2022.

IRMAA Brackets

Current IRMAA brackets are published by the Centers for Medicare & Medicaid Services.

Just as your income can be taxed at different levels, there is a tiered system of income brackets used for determining a Medicare premium adjustment.

IRMAA premium adjustments are divided into five additional income brackets. Each bracket can adjust your Part B (hospital) premium and your Part D (prescription drug) premium. 

2026 Medicare Brackets (for IRMAA Adjustments)

2026 premiums are based on 2024 Modified Adjusted Gross Income.

We don't expect the 2026 Medicare IRMAA Brackets to be published by the Centers for Medicare and Medicaid until November 2025. If it seems unreasonable to you that your 2024 income will be set in stone before you know the exact brackets that will determine your related IRMAA in 2026, we agree: you’re right! 

How do you navigate unknown IRMAA brackets?

We expect the 2026 Medicare IRMAA Brackets to receive an inflation adjustment, but it is hard to know what that adjustment might be in advance. The most conservative approach would be to assume the brackets stay the same as last year. Or, consider using the most recent brackets below plus a buffer of $10,000 to $15,000.

2025 Medicare Brackets (for IRMAA Adjustments)

2025 premiums are based on 2023 Modified Adjusted Gross Income [MAGI = AGI on Line 11 + Tax Exempt Interest on Line 2a].

Medicare's mandatory Part B premium will increase to $2,208.00 yearly ($184.00 monthly) in 2025. Adding the estimated increase to Medicare's "free" Part D premium and the total premium cost of Medicare can increase for higher-income individuals by 47%, 119%, 191%, 262%, or 286%, as illustrated below.

[Table updated November 12, 2024, with Part B and Part D premiums announced by the Centers for Medicare & Medicaid Services]

2024 Medicare Brackets (for IRMAA Adjustments)

2024 premiums are based on 2022 Modified Adjusted Gross Income [MAGI = AGI on Line 11 + Tax Exempt Interest on Line 2a].

[Table updated November 9, 2023, with Part B and Part D premiums announced by the Centers for Medicare & Medicaid Services]

Planning Around IRMAA

The key to IRMAA planning is awareness of the IRMAA brackets. 

Most of all, make sure you don't run over the cliff into a higher bracket. Unlike income tax brackets, where only the dollars in the next bracket are taxed at that higher bracket, the lines between IRMAA brackets represent an "all or nothing" line in the sand.

If you cross into a new bracket by just one dollar ($1), you face a sudden jump in the entire premium you pay for the entire year.

INTENTIONALLY PAYING a higher premium for Medicare?

As long as it doesn't occur accidentally, there are many reasons why paying a higher IRMAA makes sense. 

Sometimes IRMAA is unavoidable. For instance, IRMAA could be due to an increase in income from the sale of a primary home and any related capital gain. 

Sometimes IRMAA is intentional. For instance, a Roth conversion can be a good reason to pay IRMAA. A well-executed Roth conversion raises your income and can push you into a higher IRMAA bracket. In exchange, you stand to receive a number of benefits, especially when conversions are planned over many years, even decades. These include the potential for lower required distributions, higher-quality inheritances, higher Social Security benefits, and lower Medicare premiums in future years (when planned correctly). 

If you pay taxes (most people do) and have pre-tax savings (most people do), Roth is an opportunity that should be considered. Read more of our thoughts on the benefits of Roth conversions here.

Appealing an IRMAA Decision

If you disagree with a premium adjustment, you have the right to appeal the decision. 

You might be successful in appealing a premium adjustment decision if you believe that there was an error in the IRS data, or perhaps you filed an amended tax return and the IRS is using older or incomplete data.

Otherwise, appeals must be related to several qualifying "life-changing events", including:

• Work reduction
• Work stoppage
• Death of spouse
• Divorce or annulment
• Loss or reduction of certain kinds of pension income
• Marriage
• Loss of certain kinds of income-producing property (usually due to a natural disaster, arson, fraud, or theft)
• Receipt of an employer settlement payment

Your appeal options are worth reviewing with us here: www.openwindowFS.com/connection.

Many eligible appeals tend to occur in the initial years of retirement (or after a break from employment) when your income reported to the IRS declines compared to the previous. For example, if your income was higher two years ago because you were working and today your income is significantly lower, you can appeal the IRMAA assessment due to "Work reduction" or "Work stoppage".

1. To appeal the decision, first, you must request a reconsideration of the initial determination. A request for reconsideration can be made by calling the Social Security Administration at 1-800-772-1213 or by writing to your local Social Security office.


2. Next, file an appeal by filling out form SSA-44. In the example above, you'll show that although your income was higher two years ago, your income is now reduced due to a "life-changing event". 

For additional information on appeals, go to HHS.gov: Medicare Part B Premium Appeals.

IRMAA is re-evaluated each year.

Do you feel stuck with an IRMAA premium increase?

If you aren't granted an appeal, you will pay the higher Medicare premium(s) for one year. Fortunately, IRMAA is re-evaluated each year. 

Concerned about your IRMAA exposure?

If you're concerned about your IRMAA exposure, contact us today. We are well aware of these brackets and when you might intentionally pursue an adjustment or not, plus the tools available to plan for these costs.

If you received an IRMAA letter, feel free to share your letter with us for discussion or if you have any questions. You can securely share your IRMAA letter with us here: www.openwindowFS.com/share.

Call us now at (775) 827-0670 or schedule a Quick Connection time with us at www.openwindowFS.com/connection.