What is an IRMAA in Medicare?

When you turn 65 years old, you have the opportunity to put the taxes that you have paid throughout your career to work for you by enrolling in Medicare.

Regardless of your income level at age 65, the Medicare program uses tax proceeds that you and your peers paid over the years to reduce your out-of-pocket costs for healthcare coverage.

Some people with limited income may get an even bigger reduction. Some people with significant income may be asked to pay a little more.

That’s where IRMAA enters the equation.

Short for income-related monthly adjustment amount, IRMAA is the amount you might be asked to pay in addition to Medicare’s standard premiums for your coverage. The numbers can change every year, but generally you may be required to pay Medicare IRMAA when your annual income approaches $97,000 or your annual household income approaches $194,000.

The Centers for Medicare & Medicaid Services (CMS) estimates that less than 10 percent of people on Medicare must pay IRMAA. If you are in that category, you could benefit from knowing the details of the program and whether you can avoid any extra expenses.

For 2023, your IRMAA status is determined by your 2021 modified adjusted gross income (MAGI).

You can use information from your 2021 tax form to calculate your MAGI, but the reality is, the Social Security Administration (SSA) will gladly do so for you. If your MAGI adds up to you owing Medicare IRMAA, then the SSA will let you know by sending you an Initial IRMAA Determination that will summarize your situation and explain how you can appeal.

IRMAA is a consideration with two parts of Medicare — Part B and Part D.

Part B of Original Medicare, commonly referred to as medical insurance, features a standard monthly premium that changes each year ($164.90 in 2023). Medicare Part D, which is drug coverage offered by private insurance companies, has a monthly premium that varies from plan to plan.

The categories of income for Medicare IRMAA 2023 are the same for both Part B and Part D, but the amount of IRMAA you must pay in each category isn’t the same. Depending on your income, a maximum of $560.50 could be added to your Part B premium, and a maximum of $76.40 could be added to your Part D premium.

How much will IRMAA add to my Part B costs?

If your 2021 individual MAGI is more than $97,000, you will be subject to a higher Medicare Part B monthly premium in 2023.

If you were married and lived with your spouse during the tax year but filed a separate return, your Part B IRMAA 2023 is as follows:

Annual MAGI up to $97,000

• Cost added to standard premium: $0

Annual MAGI from $97,001-$403,000

• Cost added to standard premium: $356.00

Annual MAGI greater than $403,000

• Cost added to standard premium: $388.40

How much will IRMAA add to my Part D costs?

As mentioned earlier, the income categories for 2023 IRMAA are the same for both Part B and Part D. However, you pay significantly less IRMAA for your Part D coverage.

If you were married and lived with your spouse during the tax year but filed a separate return, your Medicare Part D IRMAA 2023 is as follows:

Annual MAGI up to $97,000

• Cost added to standard premium: $0

Annual MAGI from $97,001-$403,000

• Cost added to standard premium: $70.00

Annual MAGI greater than $403,000

• Cost added to standard premium: $76.40

Your modified adjusted gross income (MAGI) is your adjusted gross income (AGI) with qualifying deductions added back, meaning that your MAGI is equal to or greater than your AGI. Your AGI is calculated as a part of filing taxes on Form 1040 (it appears on Line 11 in 2023).

Outside of the correction of an error, there’s nothing you can do to change your MAGI for 2021. But, moving forward, if you believe your MAGI may be close to the IRMAA limits, you may benefit from seeking advice from a personal finance expert. A CPA or financial advisor may be able to suggest strategies that could reduce your MAGI and save you money.