Understanding IRMAA Taxes: What You Need to Know
As financial planners, we often encounter clients who are surprised by an unexpected Medicare expense known as IRMAA—the Income-Related Monthly Adjustment Amount. If you’re nearing Medicare age or already enrolled, understanding IRMAA is essential to avoid surprises and manage your healthcare costs effectively.
What is IRMAA?
IRMAA is an additional premium added to Medicare Part B (medical insurance) and Part D (prescription drug coverage) for individuals with higher incomes. Unlike standard Medicare premiums, which apply to most beneficiaries, IRMAA is income-dependent, based on your Modified Adjusted Gross Income (MAGI) from two years prior.
For example, in 2025, IRMAA is determined by your MAGI reported on your 2023 tax return. If your income exceeds certain thresholds, you’ll pay more for Medicare.
2025 IRMAA Income Brackets*
Here’s a quick snapshot of how IRMAA impacts premiums:
• Individual MAGI above $107,000 or
• Joint MAGI above $214,000 triggers IRMAA.
Premium surcharges increase in tiers as income rises. For higher earners, this can add hundreds of dollars to your monthly Medicare costs.
What Can Trigger IRMAA?
Several financial events can push your income into IRMAA territory, including:
1. Selling a business or property
2. Taking large retirement account distributions
3. Capital gains from investments
4. Inheritances or sudden windfalls
While these events might be one-time occurrences, they can significantly impact your Medicare costs for the following year.
Can IRMAA Be Appealed?
If you’ve experienced a life-changing event that lowered your income—such as retirement, divorce, or a significant business loss—you can file an appeal with the Social Security Administration to reduce or eliminate IRMAA. The process involves completing form SSA-44 and providing documentation of your income change.
How to Plan for IRMAA
Proactive planning can help you avoid or reduce IRMAA. Here are some strategies:
1. Control Retirement Distributions- Time withdrawals from IRAs or 401(k)s to stay below key income thresholds. Consider using Roth IRAs, which don’t count toward MAGI.
2. Strategic Investment Management- Harvest tax losses and defer capital gains to avoid income spikes.
3. Manage One-Time Income Events- If selling a business or property, explore installment sales or spreading income over multiple years.
IRMAA is a Medicare cost that can catch high-income earners off guard, but with careful planning, you can reduce its impact. This doesn't mean that everyone needs to work hard to eliminate this tax, but it is certainly a worthwhile consideration to explore. As financial planners, we are here to guide you through strategies tailored to your unique situation, while helping you ensure your retirement healthcare costs remain manageable.
If you have questions about how IRMAA might affect you, be sure to connect with us. Proactive decisions today can save you thousands tomorrow.
*For additional information on IRMAA, you can access www.SSA.gov.
This article was curated by Signature Wealth Concepts and is being provided for informational purposes only based on our general understanding of the subject matter. Duly registered and duly licensed financial professionals with Signature Wealth Concepts offer securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA/SIPC (Equitable Financial Advisors in MI & TN); offer investment advisory products and services through Equitable Advisors, LLC, an SEC-registered investment advisor; and offer annuity and insurance products through Equitable Network, LLC (Equitable Network Insurance Agency of California, LLC; Equitable Network Insurance Agency of Utah LLC; Equitable Network of Puerto Rico, Inc.). Equitable Advisors and Equitable Network are affiliates and do not provide tax or legal advice or services. You should contact your personal tax and or legal advisors regarding your specific situation before taking action. Signature Wealth Concepts is not owned or operated by Equitable Advisors or Equitable Network. PPG-7427525.1 (12/24) (exp. 12/28)
