IRMAA Income Related Monthly Adjustment AmountsCategory:

Are you in the lucky top 4% of earners? You will pay more for your Medicare benefits.  The more is IRMAA (Income-Related Monthly Adjustment Amount).  The amount you pay for your Medicare health and prescription drug coverage depends on your level of income.  There is a ladder.

Would you like to avoid paying that tax or possibly pay a smaller portion of it? We will guide you through the key IRS exceptions for Medicare IRMAA (Income-Related Monthly Adjustment Amount). By understanding and leveraging these exceptions, you can potentially lower your Medicare expenses and put more money back in your pocket.

Medicare IRMAA is an additional premium that high-income Medicare beneficiaries are required to pay. However, there are exceptions that may enable you to reduce or even eliminate this extra cost. Knowing the ins and outs of these exceptions can make a significant difference in your healthcare expenses.

In our comprehensive guide, we will break down each exception and provide you with the information you need to take advantage of them. From ‘Life-Changing Events’ to ‘Reconsideration Requests,’ we will explore all the options available to you.

Understanding the IRS Exceptions for IRMAA

The Income-Related Monthly Adjustment Amount, or IRMAA, is an additional premium that high-income Medicare beneficiaries have to pay. However, the IRS provides exceptions that may allow you to reduce or eliminate this extra cost. Let’s explore these exceptions in detail.

Life-Changing Event

One of the exceptions to IRMAA is a life-changing event. This includes events like marriage, divorce, death of a spouse, or work stoppage. If you experience any of these events, you may be eligible for a reduction in your Medicare costs.

To qualify for this exception, you will need to provide documentation of the life-changing event and submit it to the IRS. Documentation is key. The IRS will not take your word for it. You need to prove your income decreased.

Examples of documentation may include a marriage license or divorce decree, death certificate, or proof of work stoppage. By leveraging this exception, you can potentially save a significant amount of money on your monthly Medicare premium.

Medicare IRMAA Exception 1: Marriage or Divorce

Getting married or divorced can have a significant impact on your income and, consequently, your Medicare costs.

If you are recently divorced and you are a lower income earner, you may drop below the IRMAA threshold or at least step down the ladder, which would reduce your tax.
For some individuals, marriage may reduce their income because alimony is lost. The threshold is increased because it is for two persons. The initial threshold for a single individual is $103,000. For married filing jointly, it is $206,000. Either of these lifestyle changes may affect your income in that year and, consequently, your IRMAA tax, even if your income was higher in the previous year.

To take advantage of this exception, you must provide documentation of the marriage or divorce and proof of the change in income. By doing so, you can potentially save a significant amount on your Medicare expenses.

Medicare IRMAA Exception 2: Work Stoppage or Reduction

If you experience a work stoppage or a significant reduction in your work hours, you may be eligible for an exception to IRMAA. This can happen if you retire, get laid off, or experience a reduction in your income due to other circumstances.  This is probably the most common reason high-income earners should apply for the exception.  Their income was significantly higher the previous year because of work, but the year they retire and must pay the Medicare premium, their income is drastically smaller.  That is what the exception is for.

To qualify for this exception, you will need to provide documentation of the work stoppage or reduction in work hours, along with proof of the decrease in income. By doing so, you can potentially reduce or eliminate the additional premium you have to pay.

Medicare IRMAA Exception 3: Loss of Income-Producing Property

If you experienced a loss of income-producing property, such as rental properties or investments, you may be eligible for an exception to IRMAA. This can happen if your rental property becomes unprofitable or if you experience significant losses in your investments.

I had a high-net-worth client who lost significant rental income because of flooding in Missouri. His properties produced nothing for several years as he settled with insurance companies and repaired buildings.

To qualify for this exception, you will need to provide documentation of the loss of income-producing property, along with proof of the decrease in income. By leveraging this exception, you can potentially lower your Medicare costs and save money.

Medicare IRMAA Exception 5: Loss of Pension Income

Pension plans go bankrupt. Some pensions are for a particular duration. The cessation of a pension may impact your income significantly enough to affect the IRMAA tax.

To qualify for this exception, you will need to provide documentation of the change in income, along with proof of the decrease in income. By taking advantage of this exception, you can potentially reduce or eliminate the additional premium you have to pay.

Medicare IRMAA Exception 6: Employer Settlement Payment

Employers pay out settlements to employees for many reasons.  These settlements may increase income in a given year or for several.  The settlement may have its own legal stipulations.

To qualify for this exception, you will need to provide documentation of the change in income, along with proof of the decrease in income. Some legal settlements may be placed legally outside of your modified adjusted gross income.  By taking advantage of this exception, you can potentially reduce or eliminate the additional premium you have to pay.

Medicare IRMAA Exception 7: Correcting An Erroneous Determination

Sometimes, the IRS may make an erroneous determination regarding your Medicare costs. If you believe that the IRS made a mistake in calculating your IRMAA, you can submit a reconsideration request and provide additional documentation to correct the error.

To qualify for this exception, you will need to provide evidence that the IRS made an error in its determination. This can include documentation of your income, tax returns, or any other relevant information that supports your case. Correcting an erroneous determination can potentially save you a significant amount on your Medicare expenses.

Applying for a IRMAA exception

To apply for an exception to IRMAA and reduce your Medicare costs, you will need to follow a few steps.

First, gather all the necessary documentation to support your case. This includes marriage or divorce certificates, death certificates, proof of work stoppage or reduction, documentation of the loss of income-producing property, proof of a change in tax-exempt income, or evidence of an erroneous determination.

Next, complete the appropriate forms provided by the IRS SSA-44 (12-2023). These forms may vary depending on the exception you are applying for. Make sure to fill them out accurately and include all the required information.
Once you have completed the forms, submit them to the IRS along with the supporting documentation. It is crucial to keep copies of all the documents and forms for your records.

After submitting your application, the IRS will review your case and make a determination. If your exception is approved, you will receive a notification informing you of the reduction or elimination of your IRMAA.
By applying for an exception and reducing your Medicare costs, you can put more money back in your pocket and have a significant impact on your overall healthcare expenses.

Bottom Line: Don’t Ignore the IRMAA Exceptions

Leveraging the key IRS exceptions for IRMAA can reduce your Medicare costs. Whether you have experienced a life-changing event, a change in income, or an erroneous determination, understanding these

exceptions can significantly reduce your healthcare expenses.

Don’t let high-income Medicare premiums burden your finances. Take the necessary steps to apply for an exception and potentially reduce or eliminate your IRMAA. By doing so, you can save money and have more control over your healthcare expenses.

 Many years ago, I was still new to the Medicare insurance business. I had a few hundred clients but no high-income earners. I knew what Medicare IRMAA was, but I had never met someone subject to the IRMAA tax before Doug. He was an improbable candidate. After many years and thousands of clients later, I am very familiar with IRMAA, and I can tell you what the Medicare IRMAA 2024 schedule is all about.

Don’t Judge A Book by Its Cover

Doug drove up to my office on a loud Harley Davidson hog, his long hair waving in the wind. He was a big dude, and his leathers made him even bigger. I was a little nervous, but we sat down and took care ofMedicare business.

A few months later, when Doug’s Medicare started, I got a distressed phone call. “You said my Medicare premium was going to be this amount. It’s three times that!”

I was befuddled. I got my calculator out but couldn’t figure out why it was so high. Finally, I said, “Your income would have to be unusually high to be charged that much.”

Doug got quiet.  “How high?” he asked. The first IRMAA bracket was $85,000 for a single person at the time. Doug guffawed and said, “Hell, my income is way more than that.”

Turns out Doug was not only a retired municipal employee with a pension and Social Security. He was also retired from the military with 20 years of service and a pension. On top of that, he had built up a stock portfolio that kicked out around $30,000 in dividend income a year.

I should have taken the adage, ‘Don’t judge a book by its cover’ more seriously.

Since then, I have always brought up income in my introductory meetings and how income affects Medicare Part B premiums. Zip code or fashion choices are no guarantee of what someone’s income may be.  

What Is Medicare IRMAA?

IRMAA stands for income-related monthly adjustment amount. The government loves acronyms. Medicare IRMAA is a surcharge that high-earners pay for their Medicare Part B monthly premium.

Everyone pays a tax for Medicare during their working years. The Medicare tax is included in the FICA (Federal Insurance Contribution Act) you pay and is recorded on your pay stubs. Your Medicare tax is currently 1.45%. It is graduated up for higher earners.

In 1966 when the Medicare program began, the cost to workers was $3 per person per month, which is approximately $30 in today’s dollars. The baby boomers are leaving the workforce in huge numbers currently, so fewer workers are paying the Medicare tax. Medicare tax revenue is dropping like a stone in relation to the number of people collecting.

As Baby Boomers leave the workforce, they enter Medicare. The number of workers paying into Medicare is contracting, and the number taking out of the program is ballooning. Medical expenses are climbing. The current demographics are crushing Medicare’s ability to provide the same level of service as in the past because expenses are outpacing tax revenue.

Medicare Prescription Drug Improvement & Modernization Act

In 2003 Congress passed the Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA). In the legislation, Congress addressed the coming shortfall in Medicare revenue. Congress’s answer was to raise taxes. The top 7 percent of earners were required to pay more into the program. There are currently 65 million Medicare beneficiaries. The IRMAA tax will affect approximately 4.6 million people out of the 65 million. If you are a politician, it is better to keep 60.4 million voters happy, even at the expense of making 4.6 million unhappy.  

A little-known fact is Medicare beneficiaries pay less than 25 percent of the actual Medicare cost. The current Part B premium is only $174.70. That premium covers about a fifth of the actual cost. In the MMA, Congress increased the Part B premium based upon your income. The IRMAA increases the percentage that upper-income Medicare beneficiaries actually pay for their Medicare. Instead of paying only 25 percent of the Medicare cost, IRMAA payors pay for 35, 50, 65, 80, or 85 percent of the actual Medicare cost. The additional revenue the IRMAA tax brings in is allocated to offset Medicare’s budget shortfall.

How Does the Medicare IRMAA 2024 Schedule Work?

Medicare IRMAA is a different calculation from the progress income tax rates the IRS uses for federal income tax brackets.

You do not pay a federal income tax rate on everything you make. The federal government divides your taxable income into chunks — also known as tax brackets — and each chunk gets taxed at a progressively higher rate. The beauty of this is that no matter which bracket you’re in, you won’t pay the highest tax rate on your entire income! Only the “chunk” in that bracket. For example, you pay 10% on the first $40,000 of income, 25% on the next $20,000 of income (total of $60,000), and 35% on the next $15,000 of income (total of $75,000).  

Medicare IRMAA 2024 schedule utilizes a “cliff” style of assessment instead. That means if you are just $1 over the cut-off for the next tier of IRMAA, you will pay the higher amount. There are no brackets for each chuck of income like federal income tax and no graduation or progression in the amount you pay. The Medicare 2024 Part B IRMAA premium brackets change when you earn one dollar more above the line.

What Is Medicare IRMAA Based Upon in 2024?

The IRS and Social Security work with Medicare. Medicare determines your income based on your most recent tax filing. So, for example, you are going on Medicare in 2023. The most recent tax filing was in 2022 for 2021. Usually, IRMAA is based on a two-year lag in your income.

How Is Medicare IRMAA Calculated?

Your adjusted gross income (AGI) determines where you fall in the Medicare IRMAA 2024 schedule. The AGI, however, differs from the MAGI (Modified Adjusted Gross Income) you usually think of when doing your taxes. AGI for IRMAA is a Medicare-specific form of MAGI. It is your AGI with tax-exempt bonds–-both earned and accrued interest–-added back into your income. Interest from U.S. Savings bonds used for higher education is added back. Earned income from working abroad that was not added to gross income is included.  MAGI (Modified Adjusted Gross Income) for Medicare differs from what MAGI usually means for non-healthcare-related purposes.

You will be sent your Medicare IRMAA Initial Determination Notice soon after you enroll in Medicare Part B. Confirm the income amounts the IRS uses are correct–they make mistakes, too.

Medicare Financial Planning

Examine the Medicare IRMAA 2024 schedule to see if you are close to any of the limits.  

What are your plans for the future? Will you withdraw from retirement savings this year or in future years? A home sale can spike your income when your intention is only to downsize and move to a one-story home. Capital gains from a stock and property sale or other appreciated assets may come back to visit you as an unexpected IRMAA tax.

Any of these actions may increase your income substantially enough to move you into and/or up the IRMAA brackets, requiring you to pay more. Knowing and planning for these events, you can move assets in smaller amounts over time to avoid large spikes in income and, consequently, increases in your income tax and IRMAA Part B premium.

How Do I Reduce Medicare IRMAA?

Charitable donations of cash, appreciated assets, and appreciated stock can reduce your taxable and IRMAA surcharge, as well as contributions to 401ks, IRAs, and other qualified programs. Some minor adjustments may drop you down a bracket and save you some money.

What Is the Medicare IRMAA 2024 Schedule?

Since 2007, some Medicare beneficiaries’ Part B monthly premiums included a surcharge based on income. The Medicare IRMAA for 2024 is in the table below.

Individual	Couple	IRMAA Tax	Part B Total Monthly Premium
Less than $103,000	Less than $206,000	$0.00	$174.70
$103,000 < $129,000	$206,000 < $258,000	$69.90	$244.60
$129,000 < $161,000	$258,000 < $322,000	$174.70	$349.40
$161,000 < $193,000	$322,000 < $386,000	$279.50	$454.20
$193,000 < $500,000	$386,000 < $750,000	$384.30	$559.00
$500,000 < Greater	$750,000 < Greater	$419.30	$594.00

Since 2011, higher-income Medicare beneficiaries have paid a surcharge on top of their Medicare Part D premium. The Medicare IRMAA for 2023 prescription drug plans is in the table below. This does not include premiums for specific Medicare Part D plans, Medicare supplements, or Medicare Part C/Medicare Advantage plans. The totals only reflect Part B premiums and Medicare IRMAA 2023 surcharges.  

These IRMAA surcharges for Part D have nothing to do with the Part D Gap (or Donut Hole).

Individual	Couple	IRMAA Tax Part D	Total Monthly  Part B & Part D
Less than $103,000	Less than $206,000	$00.00	$174.70
$103,000 < $129,000	$206,000 < $258,000	$12.90	$257.50
$129,000 < $161,000	$258,000 < $322,000	$33.30	$382.70
$161,000 < $193,000	$322,000 < $386,000	$53.80	$580.00
$193,000 < $500,000	$386,000 < $750,000	$74.20	$633.20
$500,000 < Greater	$750,000 < Greater	$81.00	$675.00

The Bottom Line For Medicare IRMAA in 2024

Medicare has rules. Lots of rules, including how much you pay if you are successful in our country. We are about helping you navigate the rules, and in the case of Medicare IRMAA for 2024, make sure you do not

pay one penny more than is required.

If you fall into one of the Medicare IRMAA brackets, talk with your financial planner and tax consultant about minimizing the damage. Get started positioning assets well before 65 and have a plan to move yourself down the Medicare IRMAA 2024 schedule.

We are licensed and experienced insurance professionals. This may be your first Medicare IRMAA rodeo in 2024. It is not ours at Omaha Insurance Solutions. Give us a call and speak with an experienced  & licensed insurance agent professional at 402-614-3389.

  

  

IRMAA Tax Definition

Many of you may see the letters IRMAA when learning about Medicare.  The government loves acronyms.  IRMAA stands for Income-Related Monthly Adjustment Amounts.  It is based on a person’s modified adjusted gross income (MAGI).  The IRS uses a tiered scale.  Your Medicare Part B and Part D premium will cost more based upon the income thresholds you cross for that year.  How you file your taxes also determines where you fall in the IRMAA brackets and thus the amount you pay.  Be conscious of your tax filing status.  Married filing separately can have a devastating effect.

I was helping a new client prepare for Medicare a few years ago.  His income alone was over $120,000 not counting his wife’s income.  She was five years younger and had health insurance through her employer.  Her income was quite a bit smaller.  The IRMAA brackets were much lower than the IRMAA 2022 brackets now.  My client had only crossed the first rung of the IRMAA threshold.  His Part B premium was going to be just a little over the Part B premium most people were paying at the time.

He called me a month before his Medicare started.  He was almost hysterical because his IRMAA premium was over $400 per month.  I said it was a mistake and had him call Social Security.

It turned out not to be a mistake.  As the story unfolded, I discovered that he was estranged from his wife.  They were still legally married.  As a matter of fact, they had been divorced, and he remarried her again. They lived in the same residence–he lived upstairs and she lived downstairs–but they filed separate tax returns.  She absolutely refused to file jointly, and he would not divorce her because of the financial consequences.

My client fell into the bizarre category of “Married Filing Separately.”  You can see on the IRMAA Chart for 2022 what that does to the premium.  Even the lowest income earner on the IRMAA chart pays the same premium as the highest earners!

After decades in the insurance industry and thousands of clients, you eventually see everything!

He canceled his Medicare and stayed on his employer’s health plan that was terrible coverage rather than pay the IRMAA Medicare tax.

IRMAA rules are the same if you are on Original Medicare with a supplement and Part D plan or a Medicare Advantage plan.  The Medicare tax is imposed on all Medicare benefits whose income is above the tiered IRMAA limits.  IRMAA affects 5% of Medicare beneficiaries.  IRMAA 2022 rates went up significantly from IRMAA 2021.

IRMAA Brackets for 2022

your yearly income in 2020 (for what you pay in 2022) was			You pay each month (in 2022)
File individual tax return	File joint tax return	File married & separate tax return
$91,000 or less	$182,000 or less	$91,000 or less	$170.10
above $91,000 up to $114,000	above $182,000 up to $228,000	Not applicable	$238.10
above $114,000 up to $142,000	above $228,000 up to $284,000	Not applicable	$340.20
above $142,000 up to $170,000	above $284,000 up to $340,000	Not applicable	$442.30
above $170,000 and less than $500,000	above $340,000 and less than $750,000	above $91,000 and less than $409,000	$544.30
$500,000 or above	$750,000 and above	$409,000 and above	$578.30

What Is IRMAA Part D?

The IRMAA Part D prescription drug element of Medicare has a separate charge for the higher income brackets from the Medicare Part B health insurance.  The IRMAA for Part D affects 8 percent of people on Medicare prescription drug plans.  Medicare IRMAA Part D is on top of the cost of the prescription drug plan itself.  Each Part D plan has its own monthly premium the insurance companies collect.

The IRMAA Medicare Part D can be deducted from your Social Security or bank account.  Below are the new rates for Medicare Part D IRMAA 2022.

File individual tax return	File joint tax return	You pay each month (in 2022)
$91,000 or less	$182,000 or less	$0.00
above $91,000 up to $114,000	above $182,000 up to $228,000	$12.40
above $114,000 up to $142,000	above $228,000 up to $284,000	$32.10
above $142,000 up to $170,000	above $284,000 up to $340,000	$51.70

above $170,000 and less than $500,000	above $340,000 and less than $750,000	$71.30
$500,000 or above	$750,000 and above	$77.90

How Does IRMAA Work?

The Social Security Administration (SSA) will notify you within which IRMAA 2022 brackets you fall.  The notification is an initial determination.  In the notice, your rights will be spelled out and an appeal form included.

I suggest you verify that your tax information is correct and your income falls within the IRMAA limits Social Security specifies.  Double-check you are looking at the IRMAA 2022 brackets.  The official numbers come out each year by the first of the year and are found on the Medicare.gov website.

The IRS provides SSA with your tax information.  In the initial determination and before the tax is applied, check the accuracy of the IRS’s information.  Make sure SSA has your correct income,  filing status, and year.  If your income decreased significantly because of a life-changing event (LCE) consider a Medicare IRMAA appeal to SSA.

SSA’s determination can change from year to year based upon the rise or fall of your income.  Income is not only earned income but also qualified money from retirement accounts, sales of property and stock, and other investment income.  Consult with your tax advisor for the relevant and current information for your situation.  The IRMAA tax is based upon your income going back two years.  The IRMAA limits can change each tax year.

I warn clients about the IRMAA tax, but inevitably I get the hesitant phone call. ‘What is this bill from Social security about?’ I remind them of the past conversations, and for those prospective high-income earning clients, the discussion around IRMAA might determine whether they stay on their employer health plan or go on Medicare.

Sometimes, it makes financial sense–if you plan on working anyway–to stay on the employer health plan, and not enroll in Medicare Part B.  The cost of Medicare and the IRMAA tax may be substantially more than what you pay in premiums for your health plan at work.  As much as I prefer to acquire clients than not, I have recommended several individuals over the years to stay on their employer health plan.

I spoke with a surgeon the other day.  He is now 70.  We have talked each year for the past five.  He works as a research consultant at a much-reduced salary.  He is effectively part-time.  His employer provides health coverage for him and his wife that is as good as Medicare for a much lower price than what he would pay because of IRMAA.  He and his wife only have Medicare Part A.  As his income decreases, they may eventually transition to full Medicare, but with the IRMAA brackets where they are, staying off Part B and not paying IRMAA tax is better.

IRMAA Appeal

Here are the IRMAA chart 2022 exceptions broadly considered.  There are more reasons for an IRMAA appeal than can be easily listed.  This list is not exhaustive.

Situation	Description
Tax return inaccurate or out of date	A beneficiary filed an amended tax return for the year SSA is using to make an IRMAA decision There was an error in the IRS data The IRS provided SSA with older data and the beneficiary wants to use newer information You had a major life-changing event that significantly reduced your income
A Life-Changing Event (LCE) that affects the beneficiary’s modified adjusted gross income	There are 7 qualifying life-changing events: Death of spouse Marriage Divorce or annulment Work reduction Work stoppage Loss of income from income-producing property Loss or reduction of certain kinds of pension income

The most common exception that has occurred among my clients over the years is a large IRA withdrawal.  When people go to retire, some make a one-time large withdrawal from their IRA.  The purposes vary.  The most common one is to pay off a home mortgage upon retirement.

Of course, you pay the deferred taxes on the qualified money withdrawn from the IRA, but in terms of Medicare, the money is considered income even though it is retirement assets.  You did not take the IRA contributions as income when you deferred them into your retirement account, so the government wants the taxes when you realize it as income.  But, it is then counted as income for purposes of Medicare IRMAA.

More importantly, the result of an IRA withdrawal is to raise your income that year a considerable amount over your normal income.  The IRMAA tax may apply, even though it is not your normal income.  I have found those who go through the appeal process frequently receive a favorable decision in this kind of instance.  I can help you with the form.  The IRMAA appeal form is on the Social Security website.

The Mechanics of IRMAA

CMS (Center for Medicare & Medicaid Services) calculates IRMAA and publishes it yearly in the Federal Register.  Once the IRMAA is calculated, CMS informs Social Security.  Social Security has access to your income and tax information through the Internal Revenue Service (IRS).  They communicate  IRMAA determination.  Social Security, which administers Medicare, notifies you of whether you need to pay more than the standard premium. The standard premium for Part B in 2021 was $148.50.  Part B 2022 premium increased to $170.10 at the first of the year.  Part D premium varies upon the prescription drug coverage.

IRMAA Medicare is based upon your modified adjusted gross income (MAGI) that the Internal Revenue Service (IRS) will report. Social Security considers years prior.  They go back two years to determine the IRMAA surcharge.  The IRMAA will adjust each year based upon that year’s MAGI.  The surcharge is applied to the Part B premium and the Part D premium.

IRMAA Part D payments are paid separately to Medicare, and you must pay them even if your employer or another third party (such as a retirement system) pays your Part D plan premiums. You will receive a Medicare Premium Bill each month for your Part D IRMAA and you can pay it in the same way you pay your Part B premiums. You do not pay Medicare IRMAA Part D to your prescription drug plan.

Keep in mind that Medicare treats IRMAA payments the same as other premium bills, which means that you could lose your health insurance coverage if you do not make your payments on time each month.

How to Appeal Social Security IRMAA?

The Office of Medicare Hearing and Appeals handles all appeals for IRMAA tax.  There are two categories of Medicare IRMAA appeals.

• The calculation is incorrect.
• A life-changing event.

The specific life-changing events are marriage, divorce, death of a spouse, reduction in work hours and/or termination, loss of income-producing property, or loss of pension.  You submit the Medicare IRMAA appeal form to the Office Medicare Hearing and Appeals where Social Security determines if the tax will be reduced.

As I am writing this article, I can no longer find the appeal form on the Medicare.gov or CMS.gov websites where is generally where you could find this form without much difficulty.  After an hour’s search, I gave up.  Hopefully, they will put the form back upon the website soon.

If you fall in the IRMAA tax category, it is something to seriously consider as you go on to Medicare.  The tax may be temporary as your income declines in retirement, but for those whose income remains in the higher tiers, you may wish to consider other alternatives.

As always, if you need help navigating the archine world of Medicare and Medicare insurance, please give us a call at 402-614-3389.