THE 2025 INCOME RELATED MONTHLY ADJUSTMENT AMOUNT (IRMAA) BRACKETS
You may have heard about the updated IRMAA brackets being released recently. Are you affected by this change? Is there anything you can do to prevent yourself from paying a higher premium? Either way, the Income-Related Adjustment Amount (IRMAA) may be a topic of interest. In this post, I will cover the 2025 IRMAA Brackets and how they could affect your Medicare Part B and D premiums, even if you don’t currently fall into the high-income bracket. Read through this blog to be better prepared for the potential impact on your healthcare costs in the future.
Key Takeaways:
· What is IRMAA?
· How is it Calculated?
· The 2025 IRMAA Brackets
· Exemptions
· Case Study
· Strategies to Reduce or Eliminate Your IRMAA Surcharge
What is IRMAA?
IRMAA is an additional premium that some Medicare beneficiaries must pay for Medicare Parts B and D. Medicare Part B covers outpatient medical services such as doctor visits, and Part D is the prescription drug plan. The IRMAA surcharge is based on income, so those who earn above a certain threshold are subject to an adjusted premium. These brackets are determined by the Social Security Administration (SSA) with the concept that high earners have excess funds that they can contribute to the Medicare program. Therefore, the higher your income is above the default bracket, the higher your surcharge will be.
How is IRMAA Calculated?
The IRMMA calculation considers two key inputs, Modified Adjusted Gross Income (MAGI) and tax filing status. Adjusted Gross Income (AGI) can typically be found on Line 11 of Form 1040 in your Federal Tax Return. To calculate MAGI, you would then apply adjustments such as adding back certain deductions and exclusions. which you would then apply a few adjustments to calculate your MAGI. If you follow this link, it will take you to a website where you can learn exactly how to calculate your MAGI.
The SSA uses the MAGI from the tax return filed two years prior to the current year (2025 IRMAA based on 2023 MAGI). The reason they use the return from two years prior is to limit the volatility and increase the predictability of these surcharges. This also allows beneficiaries the opportunity to appeal any changes in their income that may affect their IRMAA amount each year.
The IRMAA calculation uses three tax filing options: Individual, Married Filing Jointly, and Married Filing Separately. Once you have determined your inputs, you can shift your focus to the IRMAA brackets below. First, find the column with your Tax Filing Status. Next find the row within that column with your MAGI from two years prior. The Part B and Part D Monthly Premiums in that row will be the amounts you are subject to.
The calculation is a tiered system where the amount of the premium increase depends on the Individual’s income level. The 2025 income thresholds are $106,000 for individuals and $212,000 for married couples filing jointly. The IRMAA calculation takes the AGI and tax filing status and compares it to these thresholds. If the individual/couple’s income falls above these thresholds, then they will be subject to an additional premium. There are six total tiers, and the IRMAA surcharge starts in the second tier, and increases each tier up to the sixth. It’s important to know the surcharge, if any, you are subject to so that you can employ strategies to avoid it.
The 2025 IRMAA Brackets
Remember that the IRMAA calculation uses your Modified Adjusted Gross Income (MAGI) filed two years prior. If you are trying to determine your 2025 IRMAA surcharge, then it’s time to find your 2023 Federal Tax Return.
2025 IRMAA Surcharges
Exemptions
There are five exemptions that an individual/couple could qualify for. The first is a Qualifying Life or Changing Event. If you have experienced a life-changing event such as marriage, divorce, death of a spouse, retirement, or loss of income then you can apply for exemption. The next exemption is based on work history. Medicare beneficiaries who have paid Medicare taxes for an extended period should apply for the exemption, over ten years typically qualifies.
The third and fourth exemptions are determined by the programs the individual/spouse is eligible for. If you qualify for the Extra Help Program to assist with the cost of Medicare prescription drug coverage, then you are exempt from IRMAA. The same is true for individuals/spouses that qualify for the State Medicare Program and have their premiums paid by the State. The final exemption is for Veterans. Any Medicare beneficiaries who receive certain types of Veterans benefits can apply for exemption.
You can apply for any of these exemptions by calling the SSA at 800-772-1214 and/or completing Form SSA-44.
Case Study
Bob’s is a single tax filer with a 2023 MAGI of $115,000. In this case, Bob would fall under the second tier of the IRMAA bracket for individuals who have a MAGI between $106,001-$133,000. Now that you have determined which tier he falls under, you can look at the last two columns to identify his Part B and D premiums. Bob’s Part B monthly premium would be the 2025 premium of $185 plus a monthly adjustment of $69.90 for a total of $254.90. While his Part D monthly premium would be the typical plan premium plus an additional $13.70.
Let’s cover another example for a couple filing jointly. John and Beth had a 2023 MAGI of $175,000. Using the brackets above, we can determine that John and Beth will find themselves below the first tier of the IRMAA bracket. In this case, John and Beth would each pay the standard 2025 Medicare Part B Premium of $185.00 per month. While their monthly Part D premium would also be the standard premium with no surcharge.
Strategies to Reduce or Eliminate Your IRMAA Surcharge
If you are looking for ways to reduce your IRMAA surcharge, then the easiest way is to reduce your MAGI. The reason is that Tax Filing Status cannot be changed easily and should not be manipulated to avoid the surcharge. And any exemptions that you may qualify for, will likely only apply to your IRMAA in one year. Therefore, the best way to reduce your IRMAA is through the reduction of MAGI which can be accomplished by careful tax planning and other strategies covered in this section. This doesn’t apply strictly to people currently subject to IRMAA too, the best way to avoid it all together is to be aware of it and start you planning now.
The first way to reduce your MAGI is through Charitable Donations. You can donate appreciated securities directly to a charity, make a Qualified Charitable Distribution (QCD), or use a Donor Advised Fund (DAF) to donate to charity and reduce your MAGI. Unfortunately, cash contributions will not reduce your MAGI and in turn will not affect your IRMAA. You will have to donate appreciated assets, and a Qualified Charitable Donation or QCD of your annual Required Minimum Distribution is a great way to directly reduce your IRMAA surcharge.
Another method to reduce MAGI is through Tax-Deductible Retirement Account Contributions. If you are still working while on Medicare, you can make tax-deductible contributions to certain retirement accounts in the years you have earned income. These accounts include a Traditional IRA, Traditional 401(k), 403(b), 457, or a Simple or SEP IRA.
To contrast, there are accounts where withdrawals are tax-free. If you needed money, but had increased income in a given year, then you could take distributions from a Roth IRA or Roth 401(k) for tax-free withdrawals. These accounts use post-tax contributions so you can pull the money out tax-free after reaching age 59 and 1/2. This income would not count towards your taxable income, and therefore would help reduce your MAGI.
Another thing that people can do to reduce their MAGI is to delay their Social Security benefit. If you are on Medicare and still working in a high income position, then it may make sense to delay your Social Security benefit to reduce the IRMAA surcharge. This strategy may result in lower taxable income in the future because you will not be collecting your Social Security benefit while you are still working. This will also result in a larger Social Security benefit because your benefit grows by 8% per year, plus any COLAs, each year that you delay your benefit from Social Security full retirement age, until age 70.
The next strategy is one that I reference a lot for reducing future taxes for yourself and your heirs. The strategy is called a Roth Conversion. In a Roth Conversion, you convert Traditional IRA or 401(k) funds into a Roth IRA. You pay the taxes on the amount your are converting at the time of the conversion. This will reduce the amount you are required with withdraw from your retirement account in the future. Unfortunately, this is a complex process that may not be right for everyone. Therefore, I would recommend reaching out to a financial advisor or accountant as to whether or not a Roth Conversion makes sense for you.
Harvesting tax losses. If you have Short or Long Term Capital Losses in a taxable investment account, then you should consider locking in those losses. Meaning selling those investments at a loss and buy another similar investment immediately or waiting 30 days to buy back the same investment. Capital losses can be used to offset your Capital Gains or you can deduct up to $3,000 per year against your AGI which would in turn reduce your taxable income, MAGI, and IRMAA surcharge.
Harvesting long term tax gains. It may sounder counter intuitive but if you find yourself in the 12% tax bracket, they harvesting capital gains can also help you to lower your future IRMAA surcharge. How may you ask? Currently when you have long term capital gains and your total taxable income is in the 12% tax bracket or lower, you pay 0% federal tax on these capital gains. If your state has income tax you may have to pay state income tax on the gains. Not only is paying 0% federal tax on your gains a major win, but by realizing these gains, you can use that money in the future to supplement your income and not trigger IRMAA. If you set aside this money in money market or short term bonds, you’ll be able to liquidate that money in the future for little to no capital gains when it it needed.
Thanks for reading!
To learn more about IRMAA check out:
2025 IRMAA Surcharge Update Video
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