For retirees in Medicare the tax of IRMAA is happening and at a more alarming rate than ever before, so much so that the future of IRMAA will impact many more retirees than anyone is planning for. The 2025 IRMAA brackets are expected to affect even more retirees than the current brackets. Each IRMAA tier has a corresponding marginal tax rate that determines the additional premium part B and part D surcharges.
In 2007, when IRMAA first came into existence, roughly 1.7 million Medicare beneficiaries were hit with this tax.
Today, in 2023, the amount of people in IRMAA is over a staggering 6.8 million. This is an increase of 9.00% annually from 2007 and the future doesn’t look like it will decrease either.
What is the Future of IRMAA?
According to recent reports from the Trustees of Medicare, by 2030 there will be at least 12.8 million or 25% of all eligible Medicare beneficiaries in IRMAA.
This amount of Medicare beneficiaries who will be in IRMAA, according to the Trustees, must occur, regardless of what the IRMAA thresholds may become as the Program itself (Medicare) will be insolvent in just a few years without it.
IRMAA is simply a revenue source for both the Medicare and Social Security programs, without it both programs will be in serious jeopardy. The Social Security Administration uses your modified adjusted gross income (MAGI) to determine your IRMAA tier and corresponding marginal tax rate.
What is IRMAA?
IRMAA, short for Medicare’s Income Related Monthly Adjustment Amount, is a surcharge on to of Medicare Part B and D premiums for those who earn to much income. The income-related monthly adjustment amount (IRMAA) is based on your modified adjusted gross income.
IRMAA is a tax on income.
If you earn an income over a certain limit, then your Medicare premiums will increase accordingly. The more you make in oncome the higher your premiums will be. Your adjusted gross income, as reported on your tax return, is used to determine if you are subject to the income-related monthly adjustment amount. The marginal tax rate for IRMAA can be as high as 85% for the highest income tier.
Compounding this issue of IRMAA and its surcharges is that any surcharges you are hit by will reduce your Social Security benefit too.
You pay for your IRMAA surcharges through your Social Security benefit.
So, the more income you earn in retirement the more your Medicare premiums will be and the lower your Social Security benefit will be too. For married couples filing jointly, the IRMAA threshold is higher than for single filers. The Social Security Administration determines your IRMAA tier and premium part B and D surcharges based on your taxable income.
IRMAA 2025 and into the Future:
Today, in 2024, the IRMAA Thresholds and surcharges are:
| Single | Couple MAGI | Part B | Part D |
|---|---|---|---|
| < $103,000 | < $206,000 | $174.70 | premium (varies) |
| $103,000 to $129,000 | $206,000 to $258,000 | $244.60 | $12.90 |
| $129,000 to $161,000 | $258,000 to $322,000 | $349.40 | $33.30 |
| $161,000 to $193,000 | $322,000 to $386,000 | $454.20 | $53.80 |
| $193,000 to $500,000 | $386,000 to $750,000 | $559.00 | $74.20 |
| > $500,000 | > $750,000 | $594.00 | $81.00 |
By next year the Thresholds, if inflation remains constant, IRMAA 2025, according to the Trustees of Medicare, will increase to:
| Single | Couple MAGI | Part B | Part D |
|---|---|---|---|
| < $105,000 | < $210,000 | $185.00 | Premium (varies) |
| $105,000 to $131,000 | $210,000 to $262,000 | $259.00 | Premium + $13.70 |
| $131,000 to $163,000 | $262,000 to $326,000 | $369.90 | Premium + $35.30 |
| $163,000 to $196,000 | $326,000 to $392,000 | $480.80 | Premium + $57.00 |
| $196,000 to $500,000 | $392,000 to $750,000 | $591.90 | Premium + $78.60 |
| > $500,000 | > $750,000 | $628.90 | Premium + $85.80 |
How many people will reach IRMAA 2025?
The Trustees of Medicare are reporting through its annual report that next year IRMAA 2025 will impact roughly 8.3 million retirees. This is an increase of over 10% from 2023 annually.
These 8.3 million retirees who will hit IRMAA 2025 will pay an extra $23.7 billion in surcharges because they earn too much income, and the amounts are just going to get bigger each year.
IRMAA is a revenue generator for both the Medicare and Social Security programs. The marginal tax rate for each IRMAA tier determines the premium part D surcharge and total drug costs in the coverage gap.
What is income for IRMAA 2025?
When it comes to IRMAA 2025 everything is about your income and the government defines your income as your adjustable gross income (AGI) plus any tax-exempt intertest you may have. Your modified adjusted gross income is used to determine if you are subject to IRMAA surcharges.
To figure out your amount of IRMAA income simply look at lines 2a and 11 of your 2022 IRS form 1040. Your gross income, which includes all taxable income before any deductions, is the starting point for calculating your adjusted gross income. Your IRMAA tier and marginal tax rate are based on your taxable income.