What is IRMAA?
It is the Income Related Monthly Adjustment Amount (IRMAA) to Medicare B and Medicare Drug coverage amounts that are paid monthly, either by a deduction from a person’s Social Security check or paid directly to Medicare. These are not premiums paid for separate supplemental health and drug coverage plans or Medicare Advantage plans.
Why is there an adjustment?
When a taxpayer’s Modified Adjusted Gross Income (MAGI) exceeds a certain dollar amount the monthly premium amount is increased. The Social Security Administration works with the IRS to get data from previous years’ tax returns. The IRMMA amount for 2023 for example will be based on the MAGI from the 2021 tax return. There is an escalating scale and the higher the MAGI the higher the premiums. For example, a married couple will begin to pay higher 2023 rates when their 2021 MAGI exceeds $194,000.
If you have a life-changing event you can file form SSA-44 to request that premiums be reduced, without having to wait for future returns to be filed. There are several categories that qualify as life-changing events. These include marriage, divorce, death, work stoppage or reduction, loss of income-producing property, loss of pension income, or employment settlement payments due to bankruptcy or reorganization.
When thinking about year-end planning it is wise to consider the effects of increased MAGI or life-changing events that come into consideration for the IRMAA premium adjustment.