IRMAA stands for income-related monthly adjustment amount. It’s an extra charge added to your Medicare Part B and Part D premiums when your modified adjusted gross income (MAGI) surpasses specified limits. While the standard Part B premium for 2025 is $164.90 per month, IRMAA can raise that figure substantially for higher-income beneficiaries.

How MAGI determines your premiums

MAGI for IRMAA is calculated from your IRS tax return two years prior. For example, your 2023 income affects your 2025 Medicare premiums. MAGI includes wages, interest, dividends, capital gains, rental income and tax-exempt interest. It does not include Social Security benefits or Roth IRA distributions. Knowing which income streams count can help you manage MAGI and potentially reduce surcharges.

2025 IRMAA brackets and premiums

For married couples filing jointly, the 2025 IRMAA brackets are:

Single filers and those with other filing statuses have lower thresholds. Each year, Medicare adjusts these brackets for inflation, so plan for annual changes.

Why IRMAA matters for your budget

Even a modest IRMAA surcharge can disrupt your retirement budget. A couple in the second bracket — with MAGI of $220,000 — pays an extra $65.90 per month for Part B and $12.40 for Part D, totaling nearly $930 over a year. That money might otherwise go to travel, hobbies, or emergency savings. By forecasting IRMAA, you’ll know what to expect and can build surcharges into your cash flow projections.

Appealing or reducing IRMAA charges

If your income drops — and you qualify due to a life-changing event — you can appeal IRMAA through the Social Security Administration using Form SSA-44. Qualifying events include:

• Divorce or legal separation
• Death of a spouse
• Loss of pension income
• Work stoppage or reduction in hours
• One-time capital loss

File the appeal by March 31 of the year the surcharge applies to see reduced premiums on July through December billing.

Strategies to manage your MAGI

While IRMAA is based on past income, you can take steps well before retirement to smooth MAGI:

1. Delay Roth conversions: Converting large amounts to a Roth IRA in a single year can push you into higher IRMAA brackets. Spread conversions over multiple years.
2. Harvest capital losses: Offset capital gains by selling underperforming assets. Tax-loss harvesting reduces MAGI and may lower your IRMAA tier.
3. Time asset sales: Schedule the sale of real estate, stocks or collectibles in different years to avoid income spikes.
4. Shift income: Where possible, defer income through retirement account contributions or by shifting dividends and interest into tax-favored accounts.
5. Consider gifting strategies: Transferring assets to a spouse or family member in a lower tax bracket can reduce joint MAGI — though it requires careful estate planning.

The role of tax planning

Tax planning and IRMAA management go hand in hand. Work with a tax professional to align retirement account withdrawals, Roth conversions and capital gains in a way that balances immediate income needs with long-term premium considerations. A comprehensive view of your tax situation helps minimize both IRMAA surcharges and overall tax liability.

Future IRMAA developments

Medicare’s trustees and legislators review IRMAA thresholds annually. Proposals on Capitol Hill have included smoothing brackets further and indexing thresholds more robustly against inflation. Staying informed will help you adapt strategies as rules evolve. Bookmark Medicare.gov and subscribe to SSA news releases for up-to-date information.

Action steps for pre-retirees and retirees

1. Review your tax returns: Identify income sources that count toward MAGI.
2. Run “what if” scenarios: Use online IRMAA calculators to project premiums at various income levels.
3. Plan withdrawals: Coordinate IRA and 401(k) distributions to control your taxable income.
4. Consult professionals: Engage financial and tax advisors well before Medicare enrollment.
5. File appeals promptly: If you experience qualifying events, submit Form SSA-44 by March 31 to reduce surcharges midyear.

Conclusion

IRMAA isn’t a penalty so much as a means-tested contribution designed to keep Medicare solvent while ensuring higher-income beneficiaries shoulder a fairer share. By understanding how MAGI influences your premiums, leveraging tax strategies and staying on top of annual changes, you can minimize extra costs and secure a more predictable retirement budget. Start planning now so IRMAA surcharges become a manageable line item rather than an unwelcome surprise.

Lyle Boss, The REAL BOSS Financial, endorsed by Glenn Beck as the premier retirement advisor for Utah and the Mountain West states. Boss Financial, 955 Chambers St., Suite 250, Ogden, UT 84403. Telephone: 801-475-9400.