Projections for Medicare’s 2025 income-related monthly adjustment amount (IRMAA) are out. Now is the time to check your 2023 tax return to see if you might be subject to the surcharge next year. This surcharge is paid by Medicare beneficiaries for Part B and Part D Medicare on top of the standard premiums if their taxable income exceeds certain thresholds.
The IRMAA is calculated on a sliding scale with five income brackets, topping out at $500,000 and $750,000 for individual and joint filing, respectively. These figures change annually with inflation. IRMAA calculations have a two-year lag time. Whether you pay an IRMAA in a given year depends on your tax returns from two years ago.
I scoured the most reliable sources for sound 2025 projections of the IRMAA brackets and surcharge amounts. The 2025 amounts discussed below are not final; they are estimates prepared by financial professionals who specialize in Medicare planning and IRMAA issues.
Medicare will release the 2025 IRMAA brackets in the fourth quarter of 2024. IRMAA is adjusted for inflation each year, so you could be in luck if you were slightly over one of the IRMAA threshold levels for 2024. The final brackets and surcharge amounts are usually released by the start of Open Enrollment on October 15. However, the CMS has still not released final numbers for the IRMAA brackets and surcharges or for the Part A deductible or Part B premium amounts.
We do have some idea about what 2025 Medicare Advantage and Part D premiums will be. The average total Part D beneficiary premium is projected to decrease by $7.45 in 2025, from $53.95 in 2024 to $46.50 in 2025. The average stand-alone Part D plan total premium is projected to decrease from $41.63 in 2024 to $40.00 in 2025, a decrease of $1.63.
The average monthly plan premium for all Medicare Advantage (MA) plans, which includes MA plans with prescription drug coverage, is expected to decrease by $1.23 from $18.23 in 2024 to $17.00 in 2025. The CMS says that approximately 83% of enrollees will have the same or lower premium in 2025 if they continue in the same plan.
IRMAA applies to all Medicare beneficiaries whose earnings are high enough to make them eligible, even those on Medicare Advantage. Additionally, if you have a Medicare Advantage plan that includes prescription drug coverage, the Part D IRMAA also applies.
IRMAA is assessed based on your modified adjusted gross income (MAGI)
The Social Security Administration will inform you if you are liable for the IRMAA surcharge. However, you can appeal the assessment if your financial situation has changed. For instance, if you amended your tax return, and it changes the income counted to determine the IRMAA (your MAGI), let the SSA know. They will need to see a copy of the amended tax return you filed and your acknowledgment receipt from the IRS.
Your MAGI amount is calculated anew each year, so your IRMAA can change, or even disappear, depending on how your income fluctuates. Whether or not you pay the IRMAA in 2025 will be determined by your 2023 MAGI. (Your IRMAA eligibility in 2024 was determined by your 2022 MAGI). There are many definitions of MAGI for different purposes.
It's not difficult to determine your Medicare-specific MAGI. Find the beneficiary’s adjusted gross income (AGI) on line 11 of the IRS tax form 1040. AGI is the sum of all your income that is subject to tax — the most common sources for this for retirees is IRA withdrawals, capital gains, dividends, interest from CDs, and only the taxable portion of your social security. You add the amount from line 11 to the tax-exempt interest income that can be found on line 2a of IRS Form 1040.
Projected IRMAA income brackets and surcharges for 2025
Medicare will determine the 2025 IRMAA charge in the 4th quarter of 2024. That is why your IRMAA determination is based on 2023 filing status and income — it's the last data point Medicare can obtain from the IRS to determine the 2025 IRMAA charge.
The IRMAA is indexed for inflation annually. The indexing is based on the percentage by which the average of the Consumer Price Index for Urban Consumers (CPI-U) for the 12-month period ending in the most recent August exceeds the average of the 12-month period that preceded that.
Here are projections for the 2025 IRMAA brackets and surcharge amounts:
Married Medicare beneficiaries that file separately pay a steeper surcharge because there are only two brackets. If income is greater than $103,000 and less than or equal to $397,000 will pay a $396.00 surcharge for Part B coverage and $76.50 for Part D coverage. Income greater than $403,000 will result in a Part B and Part D surcharges of $432.00 and $83.50 respectively.
How to pay your IRMAA
Your monthly Medicare Part B and D IRMAA charges will be deducted automatically from your Social Security check, with two exceptions: you have opted to defer your Social Security benefits and do not receive a Social Security check, or if the amount of your Social Security check is not large enough to cover your IRMAA. In that case, you will receive a bill for the unpaid IRMAA balance from the Centers for Medicare & Medicaid Services.
You have two different ways to pay your Medicare IRMAAs online — either through your MyMedicare account or your bank’s bill pay service. I recommend using a MyMedicare account. It is safe, secure and there is no fee to make a payment.
You’ll need to know your Medicare number and your Medicare Part A start date to create your account. You can find both on your Medicare card.
Bottom line
Income for determining IRMAA comes from the savings vehicles used by many retirees, including from traditional IRAs, 401(k)s and 403(b)s. The IRMAA is a “cliff” surcharge. That means if your modified adjusted gross income exceeds the threshold by as little as a dollar, you will have to pay higher premiums
You should be mindful of the risk of a one-time spike in income that could trigger the IRMAA. To avoid this risk, be sure to properly time a Roth conversion; you can then avoid the IRMAA when you convert and take distributions. Learn more about strategies such as how to lower taxes on required minimum distributions that could otherwise trigger the surcharge.
