Medicare is a health insurance program for seniors and people with disabilities in the United States. The income-related Monthly Adjustment Amount (IRMAA) is an important tool that influences the cost of Medicare. In simple words, surcharges are applied to individuals with higher incomes, and this substantially affects the individual’s monthly payments for parts B and D.
This article is aimed at explaining how the income-related monthly adjustment amount (IRMAA) is calculated and who qualifies for the income-related monthly adjustment amount. If you have an understanding of the income-related monthly adjustment amount (IRMAA), it will help you to manage and anticipate your health expenses.
How is IRMAA Calulated?
Income-Related Monthly Adjustment Amount (IRMAA) is determined by an individual’s Modified Adjusted Income (MAGI), which is based on the individual’s tax return. How does this work? The Internal Revenue Service (IRS) will calculate the individual’s MAGI, placing the individual into an income bracket where each bracket will correspond to a specific IRMAA amount.
Key IRMAA Points
- Each income bracket has a different Income-Related Monthly Adjustment Amount (IRMAA) surcharge applied to them. In simple terms, this means that the higher an individual’s income bracket, the higher an individual’s IRMAA surcharge. IRMAA results will result in higher Medicare premiums.
- The Internal Revenue Service (IRS) uses the individual’s income from two years before determining his or her current year’s IRMAA; in other words, an individual’s 2023 IRMAA is based on their 2021 tax return.
As an example:
Mr. James with a MAGI of $103,000 or less in 2022 and married couples (Mr. and Mrs. Ben) with a MAGI of $206,000 or less won’t pay IRMAAs in 2024.
However, if Mr. James’s income is more than $103,000 or Mr. and Mrs. Ben, who are a married couple, earn an income that is higher than $206,000, they will have to pay an additional IRMAA surcharge on top of their standard Part B and Part D premiums.
Who Qualifies for Income-Related Monthly Adjustment Amount (IRMAA)?
For you to be eligible for the Income-Related Monthly Adjustments Amount (IRMAA), you must register for Medicare Part B or Part D with a modified income that exceeds certain income thresholds.
Once you are done with the first step, the Social Security Administration will determine whether you are eligible for Income Related Monthly Adjustment Amounts (IRMAA) based on your MAGI from your tax return filed two years ago.
As an example:
In 2024, if you have a MAGI higher than $103,000 or your spouse has a MAGI higher than $206,000, then you may be subject to an extra charge. You will be notified by the Social Security Administration if you qualify for IRMAA; they also have the option to request a review if their income situation changes significantly.
Additional Tip: Does Social Security automatically adjust IRMAA?
Your income monthly adjusted adjustment amount (IRMAA) determination is updated by the Social Security Administration based on your federal tax returns, which are provided by the Internal Revenue Service.
