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IRMAA: Medicare Income Related Monthly Adjustment Amount, or IRMAA
IRMAA: Medicare Income Related Monthly Adjustment Amount, or IRMAA

This article will help you understand IRMAA and any impact it may have on your plan.

Nancy Gates avatar
Written by Nancy Gates
Updated over a week ago

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, because Medicare imposes surcharges on higher-income beneficiaries.

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.

This chart illustrates the 2021 AGI thresholds that correspond to the 2023 Medicare Premiums and 5 Tiers of monthly surcharges.

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. If you select employer sponsored coverage under the Medicare menu, IRMAA will not be included in your plan.

The calculation for IRMAA uses AGI from two years prior. If a user is already 65+, the calculation uses current year AGI (2023) for 2023 and 2024 calculations. If a user is below 65, for 2025 the calculation should also be using the 2023 AGI amount.

We model a change to IRMAA upon the death of a spouse.

IRMAA brackets and charges increase at your general inflation rate.

You can see your IRMAA Report in the Insights Library.

How is the MAGI for IRMAA computed?

You might not know it, but there are 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 normally excluded from AGI 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:

  1. Tax-exempt interest income received or accrued (usually from state and local municipal bonds).

  2. Interest earned from U.S. savings bonds used to pay higher education tuition and fees.

  3. The taxable portion of your social security is already in your AGI. Don’t include the non-taxable portion of social security for IRMAA.

  4. Earned income earned of U.S. citizens living abroad that was excluded from gross income.

  5. Income from sources within Guam, the Northern Mariana Islands, or Puerto Rico not otherwise included in AGI.

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