How to Reduce Your IRMAA Medicare Surcharges

Medicare is a healthcare program for millions, but for some, an additional cost known as the Income-Related Monthly Adjustment Amount (IRMAA) can increase premiums. IRMAA is an extra charge added to your Medicare Part B (medical insurance) and Medicare Part D (prescription drug coverage) premiums. This surcharge applies to individuals with higher incomes, ensuring those with greater financial resources contribute more to their healthcare costs. Understanding how IRMAA is determined and the strategies available to manage it can help reduce your overall Medicare expenses.

Understanding Income for IRMAA

The Social Security Administration (SSA) determines whether you owe an IRMAA based on your Modified Adjusted Gross Income (MAGI). This MAGI calculation is specific to Medicare and differs from the general Adjusted Gross Income (AGI) found on your income tax return. To arrive at the MAGI for IRMAA purposes, your AGI is increased by adding back certain tax-exempt interest income, which includes earnings from municipal bonds.

Income sources such as wages, taxable Social Security benefits, capital gains, dividends, and retirement account withdrawals contribute to your AGI, and consequently, your MAGI for IRMAA. Only the taxable portion of your Social Security benefits is included in this calculation.

The SSA uses a “look-back” period to determine your IRMAA. Your IRMAA for a given year is based on your MAGI from two years prior. For example, the IRMAA for 2025 is based on your 2023 tax return information. This two-year lag means that income fluctuations can have a delayed impact on your Medicare premiums.

IRMAA is assessed in tiers. For 2025, the initial IRMAA threshold for a single individual is $106,000, and for those married filing jointly, it is $212,000. As your MAGI increases beyond these amounts, you move into higher brackets, resulting in a greater IRMAA surcharge on your Medicare Part B and Part D premiums. The SSA will notify you if you are subject to an IRMAA assessment, providing details on your new premium amount.

Strategies for Income Management

Proactively managing your income can help reduce your MAGI and lower your IRMAA. One effective strategy involves tax-efficient withdrawals from retirement accounts. Balancing distributions from pre-tax accounts, such as traditional IRAs or 401(k)s, with withdrawals from Roth IRAs can influence your MAGI. While traditional IRA withdrawals are taxable income and increase your AGI, Roth IRA withdrawals are tax-free and do not contribute to your MAGI for IRMAA purposes.

For individuals aged 70½ or older, Qualified Charitable Distributions (QCDs) from an IRA can reduce your AGI. A QCD allows you to donate up to $105,000 directly from your IRA to an eligible charity. By lowering your AGI, a QCD can help keep your MAGI below IRMAA thresholds. This strategy is useful for those who take their standard deduction and cannot claim a charitable deduction for cash contributions.

Managing capital gains and losses is another way to control your MAGI. The timing of selling investments can impact your income in a given year. Utilizing tax-loss harvesting, which involves selling investments at a loss to offset capital gains, can reduce your overall taxable income. Capital gains distributions from mutual funds or other investments also contribute to your MAGI, so understanding when these are distributed can aid in financial planning.

Roth conversions involve moving funds from a traditional IRA or 401(k) to a Roth IRA. While the converted amount is treated as taxable income in the year of conversion, it can be a long-term strategy to reduce future IRMAA. Once funds are in a Roth account, qualified withdrawals in retirement are tax-free. This eliminates future taxable income from those funds, helping keep your MAGI below IRMAA thresholds in subsequent years, especially if timed during years of lower income.

The taxation of Social Security benefits plays a role in your MAGI. Up to 85% of your Social Security benefits can be taxable, depending on your combined income. Delaying Social Security benefits beyond your full retirement age can be a strategy, as it might reduce your income in earlier retirement years. This decision should be carefully weighed against your overall retirement income needs and other financial considerations.

Other income sources, such as rental income from properties or net income from a business, contribute to your MAGI. Understanding how these sources are calculated for tax purposes and exploring deductions or deferral strategies can help manage your overall income. Careful planning and professional advice can help you navigate these complexities to optimize your MAGI for IRMAA.

Challenging an IRMAA Determination

If you receive an IRMAA determination notice, you have the right to challenge it, especially if your income has decreased due to specific life-changing events. The Social Security Administration (SSA) recognizes several qualifying events that warrant a reduction in your IRMAA. These events include marriage, divorce or annulment, and the death of a spouse. Each of these events can alter your tax filing status and income levels, moving you into a lower IRMAA bracket.

Work-related changes are considered valid reasons for an appeal. This includes a work stoppage, such as full retirement, or a work reduction. The loss of income-producing property due to circumstances beyond your control, like a natural disaster, or the loss or reduction of an employer pension, can qualify you for an IRMAA review. An employer settlement payment, which is a one-time income event, can be grounds for appeal.

To initiate an appeal, you contact the Social Security Administration. You will need to complete Form SSA-44, titled “Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event.” This form requires you to detail the life-changing event, the date it occurred, and your estimated modified adjusted gross income for the relevant tax year.

Supporting documentation is needed to substantiate your claim. This includes pay stubs showing reduced income, a death certificate, divorce decrees, or statements from an employer. The SSA will review your submitted information to determine if your IRMAA should be adjusted. While there are no strict timeframes for a response, the SSA will notify you of their decision. If your request is denied, you have additional levels of appeal, though these may involve more formal processes.