What Are The Medicare IRMAA Brackets And How to Avoid Them

Medicare costs can take a big bite out of retirement income through monthly premiums, deductibles and other out-of-pocket expenses. And if your income is above certain thresholds, you may get hit with additional charges in the form of Income-Related Monthly Adjustment Amounts (IRMAA).

The 2025 IRMAA brackets have now been released, showing how much extra high earners will pay based on their 2023 income. So in this comprehensive guide, we’ll cover everything you need to know, including:

What is IRMAA and how are the brackets calculated
The announced 2024 IRMAA brackets for Medicare Part B and Part D
Real-life examples of how IRMAA impacts costs
10 savvy ways to potentially avoid higher IRMAA brackets
Appealing IRMAA with Form SSA-44
Projected brackets for 2025 and the history of changes
Summaries and FAQs to help grasp the key details

We’ll also discuss smart strategies to implement now if you want to aim for lower IRMAA brackets in future years. So let’s get started!

WHAT IS IRMAA FOR MEDICARE?

First, what does IRMAA stand for and what is it?

IRMAA = Income-Related Monthly Adjustment Amount
It's an extra charge added to standard Medicare Part B and Part D premiums
The extra charge affects higher income Medicare enrollees

So in plain terms, IRMAA is an additional monthly fee that some Medicare members with higher Modified Adjusted Gross Income (MAGI) must pay on top of the usual Part B and Part D premiums.

HOW IS IRMAA CALCULATED?

The calculation for IRMAA brackets is based on your income from two years prior, specifically your "Modified Adjusted Gross Income” or MAGI.

Your MAGI for IRMAA purposes can differ from the MAGI used for regular tax calculations. Here are the key steps to determine your specific MAGI for IRMAA brackets:

Find your Adjusted Gross Income (AGI) on your federal tax return from two years ago. For 2025 IRMAA, this would be your AGI from your 2023 tax return.
Add any tax-exempt interest earned in that year that was not included in AGI.
Add any tax-exempt interest from U.S. Savings Bonds used for higher education costs.
Add any earned income while living abroad that is otherwise excluded from AGI.
Add other forms of income specified by Medicare like income from Puerto Rico, American Samoa, Guam or the Northern Mariana Islands.

The total equals your Modified Adjusted Gross Income (MAGI) for calculating IRMAA brackets.

And which tax return is used if the 2 years ago return is not yet filed? In that case, your prior year MAGI would be applied based on the latest available final tax return on record.

2025 MEDICARE PART B AND PART D PREMIUMS

Before we dive into the tiers for 2024, let’s quickly review the standard premium costs set by Medicare which then apply to all enrollees as a baseline.

The standard Medicare Part B premium will increase in 2025 up to $185.00 per month. This represents a rise from $174.70 in 2024.

Medicare Part D premiums can vary more significantly depending on your prescription drug plan, location and other factors.

With those base rates in mind for next year, let’s look at how IRMAA brackets can raise your Medicare costs even higher. The average estimated monthly Part D plan premium in 2025 is $46.50. However, premiums can range from $0.00-$190.80 per month.

WHAT ARE THE 2025 IRMAA BRACKETS?

If your 2023 Modified Adjusted Gross Income (MAGI) was above $106,000 as an individual tax filer or above $212,000 as a married couple filing jointly, you may be hit with IRMAA premium increases for 2025.

The extra IRMAA charges are added on top of your standard Medicare Part B and Part D premium costs.

Here is an overview of the announced IRMAA brackets for 2025, which determine how much you'll pay based on your 2023 MAGI and filing status:

To see real examples of how IRMAA can substantially increase your Medicare expenses, let's look at two case studies.

IRMAA Case Study Examples

Here is how the 2025 IRMAA brackets would impact two hypothetical Medicare members:

Case Study #1: Mary files her taxes as an individual. Her MAGI was $102,500 based on her 2023 federal tax return. Since her income falls under $106,000, Mary will not pay any IRMAA premium charges for 2025. Her monthly costs will simply be:

Part B: $185.00 (standard 2025 premium)
Part D: Variable based on her chosen plan

Case Study #2: Bill and Barbara file their taxes jointly as a married couple. Based on their 2023 joint tax return, their MAGI was $215,000. This means they fall into the second IRMAA tier for 2024 premium costs:

Part B: $259.00 per month per person
- Includes $185.00 standard premium
- Plus $74.00 IRMAA surcharge
Part D: Plan premium + $13.70 extra per month per person

So in Bill and Barbara's case, IRMAA is costing them $2,104.80 ($1,052.40 per person) more per year in Medicare expenses!

As you can see, IRMAA brackets can really take a bite out of retirement income. So next, let's cover some key ways you may be able to avoid landing in a higher bracket.

10 SAVVY WAYS TO AVOID HIGHER IRMAA BRACKETS

The most direct way to aim for lower IRMAA brackets in future years is to reduce your Modified Adjusted Gross Income.

Here are 10 smart tips and strategies to help minimize your MAGI:

1. Make Charitable Donations

Giving to charity benefits good causes and can lower your taxable income. Certain types of charitable donations can also help reduce your specific MAGI for calculating future IRMAA brackets:

Donate appreciated assets like stocks or mutual funds: Since capital gains increase MAGI, donating appreciated securities avoids that taxable gain for IRMAA purposes.
Make a Qualified Charitable Distribution (QCD): If over age 70 1/2, you can donate IRA assets to charity to fulfill some or all of your Required Minimum Distribution (RMD). This avoids taxes on the RMD, resulting in lower MAGI.
Contribute to a Donor Advised Fund (DAF): Lump-sum donations to a DAF lower your taxable income in the current tax year. The DAF then grants funds to charities over time per your guidance.

There are some limits, but when structured appropriately, charitable giving can be an effective way to reduce IRMAA brackets.

2. Contribute to Retirement Accounts

If you still have earned income after starting Medicare, contributing pre-tax dollars to certain retirement accounts also lowers your current year Modified Adjusted Gross Income.

Some options if you have employment income include:

Traditional IRA
401(k), 403(b) or 457 retirement plan
SEP IRA or SIMPLE IRA (if self-employed)

Just be mindful that withdrawals later count as income and impact IRMAA.

3. Prioritize Tax-Free Income Sources

Aim to take more retirement income from sources that won’t increase your tax bill or IRMAA brackets:

Roth IRA or Roth 401(k) withdrawals after age 59 1⁄2 (if account open 5+ years)
Reverse mortgage proceeds (if rules and costs make sense for your situation)
Certain life insurance cash value withdrawals (understand your policy first)

4. Use More Tax-Efficient Investing

Reduce investment taxes in your regular, taxable brokerage accounts and IRAs by:

Choosing index funds over actively managed mutual funds more prone to capital gain distributions
Focusing on stocks with lower turnover and dividends
Locating assets like bonds and REITs in sheltered retirement accounts
Harvesting losses to offset gains

5. Implement a Tax-Efficient Withdrawal Strategy

Create a written retirement income plan dictating the ordered steps for which accounts to withdraw from first.

Tax-advantaged sources like Roth accounts generally make the most sense to tap initially when eligible. This helps preserve Traditional IRAs and 401(k)s longer to reduce Required Minimum Distributions (RMDs) later.

6. Make Informed Tax-Planning Decisions

Consult with a fee-only Certified Financial Planner® or tax expert before finalizing major financial decisions with tax impacts like:

Selling rental property or a business
Exercising stock options
Moving or relocating
Withdrawing large retirement account balances

Their guidance can help you implement the most tax-efficient strategies.

7. Evaluate a Medicare Savings Account

A Medicare Savings Account combines a high deductible Medicare Advantage Plan with a special MSA savings account. Medicare contributes money to the MSA every year which can be used tax-free towards medical expenses.

Any unused balance rolls over year after year earning interest. And required withdrawals do not start at age 73 like a Traditional IRA. For qualifying individuals, this can make an MSA advantageous for reducing IRMAA brackets versus other savings vehicles.

8. Do Roth IRA Conversions

Consider converting some Traditional IRA and 401(k) money to a Roth IRA during early retirement before age 73 (or 75) when delayed RMDs kick in.

Pay the conversion tax now when income is lower. This reduces future RMD amounts and resultant taxes which directly impact IRMAA calculations. Essentially, Roth conversions let you prepay taxes at what may be lower rates.

9. Harvest Tax Gains

Tax gain harvesting takes advantage of the 0% long-term capital gains tax bracket for lower earners. For 2023, the 0% threshold goes up to $44,625 for singles and $89,250 for married joint filers.

During early retirement, realize long-term gains up to the 0% cutoffs to avoid higher future taxes on the growth which would increase IRMAA brackets.

10. Appeal Based on Life Changes

If you experience certain major life events, you can appeal to Social Security for reconsideration of your IRMAA through Form SSA-44.

Qualifying reasons include:

Death of a spouse
Marriage
Divorce or annulment
Loss of income-producing property

Provided you meet the criteria, an adjustment is possible along with refund of prior overpayments.

Now that we've covered 10 ways to reduce, avoid or appeal IRMAA brackets, let's discuss the official process for contesting your determination if you believe issues exist with the data or calculations.

HOW TO APPEAL IRMAA IN 2025

If you feel your 2025 IRMAA premium charges are incorrect or want to dispute the determination, you can request an appeal by:

Asking Social Security for a "new initial determination"
Submitting a Request for Reconsideration (Form SSA-44)
Calling Social Security at 800-772-1213

Some common reasons for appeals include:

Incorrect income data used to determine the brackets
Changes in tax filing status
Major life events as covered previously

The process involves completing Form SSA-44 including contact info, SSN, details on why you are requesting the appeal and signing the form.

When submitting an IRMAA appeal, be mindful of key deadlines:

You have just 60 days from receipt of your Medicare Part D IRMAA notification letter to request an appeal
The countdown starts on day 5 after the letter's date, assuming 5 days for delivery
Missed deadlines can invalidate your appeal rights

If your appeal gets denied initially, you can request higher reviews from the Social Security Office of Appeals Operations. But the easiest path is making your best case with Form SSA-44 upfront.

History of Medicare IRMAA

While IRMAA brackets continue expanding today, this system did not always exist. To best prepare for the future, it helps to understand where IRMAA originated and how the income tiers have progressed.

Key events in the history of IRMAA include:

2003 - Congress first establishes IRMAA rules within the Medicare Modernization Act
2007 - IRMAA bracket system for higher-income enrollees initially launched
2011 - The Affordable Care Act (ACA) applies IRMAA to Medicare Part D
2018 - An Act of Congress adds 5th tier for highest earners with $750k+ joint income

From 2007 through 2021, the dollar cutoffs for IRMAA brackets grew between 4.73% to 8.02% year-over-year. More recently, inflation has accelerated, so thresholds may continue rising faster than in the past.

Key Takeaways from the Guide

To help summarize the extensive information we covered on IRMAA brackets for 2024 and how they are determined, here are some of the key takeaways:

IRMAA = Extra income-based monthly charges for Medicare Part B and Part D premiums
Your IRMAA bracket is based on your Modified Adjusted Gross Income (MAGI) from two years ago
High earners with MAGI over $106k single or $212k married filing jointly may pay IRMAA surcharges
Strategies like QCDs, Roth IRA conversions and more can help lower future MAGI
You may qualify to appeal IRMAA if major life changes occurred or incorrect data was used
Brackets have been rising between roughly 5% to 8% annually with accelerating inflation
Focusing on the long-term can help put in place savings and tax plans aiming to reduce exposure to higher IRMAA brackets

Understanding how the IRMAA system works, what your costs may look like now and potentially down the road, and proactive steps you can take puts you in a much better position.

Hopefully this guide gave you the knowledge needed to make smart decisions when it comes to this often costly component of Medicare.

Frequently Asked Questions (FAQs) on IRMAA

Below are answers to some common questions Medicare beneficiaries may have regarding IRMAA brackets and dealing with the extra costs:

1. Who determines my IRMAA bracket and extra charges?

The Centers for Medicare & Medicaid Services provides the income brackets to the Social Security Administration (SSA) each year who then actually assesses the monthly IRMAA premium surcharges to qualifying Medicare recipients.

The income data utilized comes directly from your latest available federal tax return (generally from two tax years prior). The Internal Revenue Service provides that information to SSA.

2. What if my current income is lower than what IRMAA brackets were based off?

Unfortunately, your actual current income or lifestyle changes do not impact what IRMAA bracket and premium costs you pay under the system.

As noted above, surcharges are based strictly on official tax return data from 2 years ago. So even if you retire, get a divorce, sell property at a loss or undergo other major financial changes, it does not immediately adjust.

The only recourse is to implement proactive tax strategies lowering future Modified Adjusted Gross Income to aim for reduced IRMAA in upcoming enrollment periods.

3. Can I switch to an Advantage Plan to avoid IRMAA costs?

Medicare Advantage plans or "Part C" apply the same IRMAA assessment methodology and rules as Original Medicare. So changing from Parts A+B over to a Medicare Advantage plan will generally not enable you to avoid paying IRMAA brackets if your past MAGI was higher.

The main way enrolling in an Advantage Plan could save money versus Original Medicare is that total medical costs are capped in a given year. But again, IRMAA premium charges continue being assessed annually based on your tax filing status and prior income.

4. What happens if I don't pay my IRMAA surcharge amounts?

If the extra IRMAA premium charges are not paid by the due dates, you would be at risk of losing your Medicare Part B coverage since that is directly funded via beneficiary premiums.

Part D prescription plans could also disenroll you for non-payment resulting in late penalties down the road if you attempt to re-enroll without proof of other valid drug coverage.

So while frustrating for some, keeping IRMAA payments current is vital to retain healthcare coverage in retirement if subject to the extra brackets. Learning ways to potentially reduce exposure to those added costs over time is key.

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