What is IRMAA?
Not everyone knows this, but if you have a high income you may be subject to a Medicare surcharge, which can be substantial.
Medicare premiums are assessed on a year to year basis, based upon your Modified AGI from 2 years prior. The AGI threshold changes annually with inflation and the threshold is actually a cliff, meaning one dollar over the limit can incur a surcharge for the entire year. There are 5 tiers of Medicare surcharges based on these income thresholds.
So, if you have a high income, you may be subject to this surcharge, which is officially called the Income Related Monthly Adjustment Amount, or IRMAA. Although IRMAA is not explicitly displayed in the program, it is applied unless you select “itemize” under the Medicare menu.
This chart illustrates the 2020 AGI thresholds that correspond to the 2022 Medicare Premiums and 5 TIERS of monthly surcharges.
MAGI Married Filing Joint
Monthly Medicare Premium
If a married couple is in tier two in 2022, their Medicare premium will be double the normal premium. Instead of a total Medicare B cost of $4,082, their cost will be $8,165.
How is IRMAA treated in PlannerPlus?
If you are subject to IRMAA, the Planner will include the cost of IRMAA in your Medical Expenses. If you select “itemize” under the Medicare menu, IRMAA will not be included in your plan.
Is there a chart that will allow me to determine whether I may be subject to IRMAA?
Insights > Taxes > Gross Taxable Income by Source gives you an estimate of your AGI. You can compare your AGI with the IRMAA threshold.
If you may be subject to IRMAA, when you run the Roth Conversion Explorer, any IRMAA liability will be displayed in the last chart of the Explorer results. If this chart does not appear when you run the Explorer, your plan is not subject to IRMAA under the assumptions you are using when you run the Explorer.
How is the MAGI for IRMAA computed?
You might not know that there are also a couple of Modified AGI calculations which are used in particular instances such as the determination of thresholds and credits. We refer to these as MAGIs. To calculate a MAGI you usually have to add an item back in such as tax exempt interest.
There’s a specific MAGI that’s used in the calculation of your Medicare Premium. To calculate the MAGI for IRMAA, you have to add back the following items:
Tax-exempt interest income received or accrued (usually from state and local municipal bonds).
Interest earned from U.S. savings bonds used to pay higher education tuition and fees.
The taxable portion of your social security is already in your AGI. Don’t include the non-taxable portion of social security for IRMAA.
Earned income earned of U.S. citizens living abroad that was excluded from gross income.
Income from sources within Guam, the Northern Mariana Islands, or Puerto Rico not otherwise included in AGI.