What is Medicare IRMAA for high income earners?
Medicare IRMAA stands for Income Related Monthly Adjustment Amount and the Social Security Administration (SSA) determines who pays an IRMAA. It is a payment that high-income earners must pay when they sign up for Medicare Part B and/or Part D plan coverage. This payment is based on the individual’s modified adjusted gross income (MAGI) reported on their most recent tax return. For those who have MAGI above certain thresholds, Medicare will charge them an additional premium based on their filing status and income level.
The additional premiums can range from 35% to 85% of the standard premium amounts depending on the individual’s income level. Individuals with higher incomes may also be subject to a Medicare High Income Surcharge, which can add an additional 15% to the IRMAA amount they are already paying.
How is Medicare IRMAA calculated?
IRMAA, is a surcharge applied to Medicare Part B and Part D monthly premiums. Your IRMAA determination is made by the income level of the beneficiary, as reported on their most recent tax return. The IRS provides a chart each year that indicates how much the surcharge will be based on income level. Generally, those in higher income brackets receive a larger surcharge. Medicare uses an individual’s modified adjusted gross income (MAGI) to determine whether they qualify for IRMAA and how much it will be.
MAGI includes wages, taxable interest, dividends, capital gains, rental and royalty income, retirement distributions and pensions. If individuals find themselves in a higher tax bracket than expected when their IRMAA is calculated, they can request an adjustment if their circumstances have changed due to retirement or other life changes.
How much are IRMAA Part B premiums?
The cost of the IRMAA Part B premiums are determined by the income reported for the second-most recent tax year (two years prior). In other words, it’s based on your tax return two years ago. The amount can vary substantially depending on your income. Those with incomes over certain thresholds may also have to pay an additional income-related monthly adjustment amount (IRMAA) on top of their Part B Medicare premiums. For about 7% of people with Medicare Part B that have a high income, their Part B premiums can range from $230.80-$560.50 per month.
