IRMAA for Higher Income

Medicare loves acronyms and has a lot of them. One such acronym (which took me a while to memorize what it even stood for), is IRMAA. It stands for “Income Related Medicare Adjusted Amount.” If it was me creating the acronym I would have gone with YEMYOM which stands for, “You Earn More, You Owe More.” 

The theory behind IRMAA or YEMYOM, with my acronym, being that when Bill Gates became eligible for Medicare a few years ago why should he only pay the same $202.90 as everyone else?

Here is how IRMAA works: Social Security, which runs Medicare, takes two years of your tax returns and they apply a formula to them called MAGI, which stands for Modified Adjusted Gross Income. MAGI is very similar to your tax returns Adjusted Gross Income so to figure out if you are going to be subject to IRMAA or not you can essentially use that. 

The threshold for IRMAA is $109,000 for a single filer, or $218,000 as a joint filer. That’s for the lowest amount of IRMAA so if your taxable income is below that amount, you can watch this video just to say, “Hah hah” to those who have to pay it, but it won’t apply to you. If you are above the IRMAA amount, then you’ll need to pay this extra amount with an increasing scale based on your income.

If you are IRMAA what will happen is that after you apply for your Medicare card at some point a letter will come in the mail from Social Security saying, “Congratulations, your IRMAA,” and give you your IRMAA level and extra amount you need to pay.  

Two common questions I get from people is one: “Which tax returns will they use?” It’s your last two years tax returns but when they switch over to the latest return is not when you file it, it may be many months later that they make the transition. Even more important people often ask, “My income is going down, especially since I retired, when will my IRMAA adjust?”  

The good news is that the government has form SSA-44. SSA stands for Social Security Administration, form number 44. It is used when you have what is referred to as a Life Changing Event, such as retirement that changes your income. You attach the supporting documents such as a letter from your employer showing that you’re retiring and as a result losing your job income. Then, voila, in theory your IRMAA will come off altogether or it may be adjusted down to a lower bracket. 

I always say to clients be proactive and file the form. You don’t want to wait an extra year for the government to catch up with knowing your income is lower. A really good idea is to make an appointment with your local Social Security office to provide your SSA-44 form and your backup documentation directly to a Social Security agent. You’ll also want to bring your latest tax return.  If you win your IRMAA appeal it will also be retroactive to the date of your life changing event; so, if you have made a few higher payments because of IRMAA since retiring, then you could be getting money refunded back to you.  

Now let’s look at the brackets. This is for 2026 and are based off of the base rate for Part B medical costs of $202.90. Note that most people do not pay anything for Part A and no IRMAA ever applies. 

The first bracket starts at $109,000 filing single and $218,000 joint. It’s $284.10 or around an extra $81 above the normal amount. It works out to a 40% surcharge. 

But wait, as they say in the Ginza knife commercial, there’s more! You also get to pay Part D IRMAA of $14.50. Part D is your drug coverage. People who are not IRMAA payers, pay zero to Medicare for Part D. Only those of us who are designated as IRMAA have the privilege of paying something. So, in the lowest bracket you are paying $298.60 in combination. Or an extra $95.50 in surcharge.

Bracket two begins over $137,000 filing single or $274,000 filing jointly. The cost for your Part B goes up $405.80 plus $37.50 for Part D IRMAA, for a total of $443.30.

Bracket three starts at $205,000 when filing single, and $410,000 filing jointly. Your Part B comes to $527.50 a month, Part D another $60.40, totaling $587.50. 

Bracket five is for those with over $500,000 in income filing single, or $750,000 filing jointly. Your Part B comes to $689.90 a month, Part D IRMAA adds another $91.00, totaling $780.90 a month. 

In conclusion, lots of my clients bemoan, “It’s not fair.  I keep getting hit with more and more taxes simple because I did well and earn a lot of money.” Others shrug and say, “I guess owing a lot of taxes is a nice problem to have.”