Medicare Costs and Income: IRMAA Explained

As you prepare for healthcare expenses in retirement, you may come across the term “Income-Related Monthly Adjusted Amount,” or IRMAA. This refers to the extra premiums higher-income individuals may pay for Medicare Part B and Part D coverage.

IRMAA surcharges can apply whether you’re enrolled in Original Medicare or a Medicare Advantage plan. Your eligibility for IRMAA is based on your modified adjusted gross income (MAGI) from two years prior.

While growing your retirement income can offer greater financial flexibility, it may also lead to increased Medicare premiums. If your income surpasses specific thresholds, IRMAA will be added to your standard Medicare premiums—on top of any taxes you may owe.

These surcharges can significantly raise your Medicare costs—potentially by thousands of dollars per year—depending on your income level.

IRMAA often catches retirees by surprise. In this guide, we’ll explain how IRMAA works, how it affects your Medicare premiums, and ways to manage or reduce these additional costs.

How IRMAA Works with Medicare

If your income exceeds a set threshold (adjusted annually for inflation), you’ll owe an IRMAA surcharge on top of your regular Medicare premiums. IRMAA doesn’t provide additional benefits—it’s simply an added cost for individuals with higher incomes.

The surcharge is based on your MAGI from two years earlier. MAGI includes your total income before federal deductions, excluding certain adjustments. If your income has decreased substantially since then, you may qualify for an adjustment or exception.

How IRMAA Is Calculated

IRMAA is determined by the MAGI reported to the IRS two years before the current Medicare year. This includes income sources such as wages, taxable retirement distributions, interest, dividends, capital gains, and the taxable portion of your Social Security benefits.

If your MAGI exceeds the income thresholds, IRMAA applies to both Medicare Part B and Part D premiums.

How IRMAA Is Assessed: Year-by-Year

IRMAA Income Brackets for 2025

For 2025, the standard Medicare Part B premium is $185.00 per month. However, if your modified adjusted gross income (MAGI) from 2023 exceeds certain thresholds, you may be subject to an Income-Related Monthly Adjustment Amount (IRMAA), resulting in higher premiums for both Part B and Part D. The following table outlines the 2025 IRMAA brackets based on your tax filing status:

Note: The Part D surcharge is added to your plan’s premium. These IRMAA amounts are based on your 2023 tax return and are subject to annual adjustments.

Note: Married individuals filing separately are subject to different thresholds. In 2025, IRMAA applies if MAGI exceeds $106,000 and reaches the highest bracket at incomes above $394,000.

Understanding Medicare Part B IRMAA

IRMAA can substantially increase your Part B premiums. In 2025, individuals in the highest IRMAA bracket may pay several hundred dollars more per month. However, only a small percentage of Medicare enrollees fall into this category.

According to the Medicare Trustees Report, about 7% of Part B beneficiaries were subject to IRMAA.

Can the Death of a Spouse Trigger IRMAA?

Yes. IRMAA income limits for couples are double those for individuals. If you previously qualified as a couple and your spouse passes away, your income may still exceed the single-filer threshold—resulting in IRMAA surcharges under your new filing status.

Strategies to Reduce or Avoid IRMAA

Fortunately, there are several effective ways to limit or avoid IRMAA surcharges on your Medicare premiums. Below are key strategies to consider:

How Retirement Income Planning Affects IRMAA

The way you structure retirement income can play a major role in whether you are subject to IRMAA surcharges. For example, withdrawals from traditional IRAs, 401(k)s, and other tax-deferred accounts count toward your modified adjusted gross income (MAGI) and may increase your Medicare premiums if they push you over certain thresholds.

In contrast, qualified withdrawals from Roth IRAs do not count toward MAGI and therefore do not affect IRMAA. Certain tax-efficient strategies—such as making qualified charitable distributions (QCDs) from an IRA—can also help reduce MAGI and potentially limit or avoid surcharges.

The timing of distributions, realization of capital gains, Social Security claiming age, and required minimum distributions (RMDs) should all be considered when developing a long-term plan to manage Medicare costs. Since IRMAA is based on your tax return from two years prior, reviewing your income sources and how they impact your premiums is essential.

Final Thoughts on IRMAA and Retirement Planning

IRMAA doesn’t affect every Medicare beneficiary, but for those it does, the added cost can be substantial. Fortunately, thoughtful planning can help reduce or eliminate these surcharges.

By working with Foxcove Financial and managing your income strategically, you can avoid unexpected Medicare costs and help preserve more of your retirement savings. For questions about your personal tax situation, be sure to consult your CPA.

Frequently Asked Questions: IRMAA & Medicare Premiums

• What income counts for IRMAA?
  Your modified adjusted gross income (MAGI) includes wages, required minimum distributions, taxable Social Security, investment income, and certain other sources.
• Is IRMAA permanent?
  IRMAA is reassessed every year, based on your most recent tax return. It may go down if your income drops.
• Can I appeal my IRMAA determination?
  Yes, especially after qualifying life events (e.g., retirement, divorce, death of spouse). Documentation is required.
• Do Roth IRA withdrawals affect IRMAA?
  Qualified Roth IRA withdrawals are not included in MAGI for IRMAA purposes.
• Where can I learn more about healthcare planning in retirement?
  See our guide to managing healthcare costs and Medicare basics.

Looking for Help with Medicare Costs and Income Planning?

IRMAA and rising Medicare costs can catch retirees by surprise, but with advance planning and the right strategies, you can manage these expenses and help protect your retirement income. Schedule a call with Foxcove Financial for a personalized review of your income options and Medicare planning.