Understanding IRMAA: How to Manage Rising Medicare Costs in 2025
Medicare beneficiaries with Part B and/or Part D prescription drug coverage may face additional monthly surcharges known as the Income-Related Monthly Adjustment Amount (IRMAA). These surcharges, determined by the Social Security Administration, are based on modified adjusted gross income (MAGI) from two years prior—in this case, the 2025 premium surcharge is based on your MAGI from 2023.
For those earning above specific income thresholds, IRMAA applies to both Original Medicare and Medicare Advantage enrollees, significantly increasing monthly costs. If you’re navigating Medicare costs or planning for retirement, this overview can help you understand the impact of IRMAA and the steps you can take to effectively manage your premiums.
Eligibility
For 2025, Medicare beneficiaries with income over $106,000 (for single tax filers and for married people who file separately) or $212,000 (for joint filers) will pay the surcharge. The total monthly surcharge for these beneficiaries will range from $87.70 to $529.70 (see chart below).
The IRMAA surcharge is calculated on a sliding scale with five income brackets topping out at $500,000 and $750,000 for individual and joint filing, respectively. These figures change annually with inflation.
| Tier | 2025 Single MAGI* | 2025 MFJ MAGI* | Part B Premium | Part D Premium | Total Surcharge |
|---|---|---|---|---|---|
| Baseline | <$ 106,000 | <$212,000 | $185.00 | Plan Premium | N/A |
| 1 | Up to $133,000 | Up to $266,000 | +$74.00 | +$13.70 | +$87.70 |
| 2 | Up to $167,000 | Up to $334,000 | +$185.00 | +$35.30 | +$220.30 |
| 3 | Up to $200,000 | Up to $400,000 | +$295.90 | +$57.00 | +$352.90 |
| 4 | Up to $500,000 | Up to $750,000 | +$406.90 | +$78.60 | +$485.50 |
| 5 | >$500,000 | >$750,000 | +$443.90 | +$85.80 | +$529.70 |
*Based on 2023 income
Mastering Healthcare Expenses in Retirement
Planning for healthcare in retirement can be complicated, but it doesn’t have to be. Savant’s eBook, Mastering Healthcare in Retirement, explains your options, from Health Savings Accounts to Medicare and Long-Term Care insurance.
Income
IRMAA is based on your MAGI, which includes your adjusted gross income plus:
- Tax-exempt interest (municipal bonds, for example).
- Interest from U.S. savings bonds used for qualifying education expenses.
- Nontaxable income from U.S. territories.
- Income earned abroad that was excluded from gross income.
Only the taxable portion of your Social Security benefit is included in IRMAA calculations.
IRMAA is a “cliff” surcharge, meaning you will pay higher premiums if your MAGI exceeds the threshold by one dollar. Therefore, you should be mindful of events that increase your income and could trigger IRMAA, such as realized gains and capital gains distributions in taxable accounts, Roth conversions, and distributions from traditional IRAs.
Strategies to Manage IRMAA
Lowering your MAGI is the best way to avoid (or reduce) IRMAA charges.
- If you are still working and have earned income, increase your 401(k) or other tax-deferred account contributions.
- Donate appreciated assets directly to charity from your taxable accounts. This can help avoid capital gains taxes.
- Make qualified charitable distributions (QCDs). If you are 70½ or older, you can donate up to $108,000 (2025 limit) to qualified charities directly from your IRA. Once your required minimum distributions (RMDs) begin, QCDs will count toward your required distribution. QCDs aren’t tax deductible, but they will reduce your MAGI.
- Distributions from Roth accounts do not count toward your MAGI. In addition, Roth conversions reduce future RMDs from your retirement accounts, which may help you avoid a higher IRMAA bracket.
- Look for losses in your taxable accounts that could help offset any capital gains.
Appeal
If you experience a life-changing event, such as the death of a spouse or a reduction or loss of income, you can appeal and request a redetermination by filing the Medicare Income-Related Monthly Adjustment Amount Life-changing Event form (Form SSA-44). You must include supporting documentation such as a death certificate or a copy of the tax return for the year your income declined.
Bottom Line
Navigating IRMAA surcharges can be a complex but essential part of managing your Medicare costs. By understanding how these surcharges are determined, monitoring your income thresholds, and employing effective strategies to lower your modified adjusted gross income (MAGI), you can help minimize additional premiums. Additionally, if you experience a life-changing event, don’t hesitate to appeal and request a redetermination. Taking proactive steps to manage your finances and stay informed about IRMAA changes will help you be better prepared to make the most of your Medicare benefits.
This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation.
Wade A. Warren
Private Client Group Planner
CFP®