What is IRMAA and Why It Matters for Your Medicare Costs

IRMAA stands for Income-Related Monthly Adjustment Amount. It is an extra charge added to your Medicare Part B and Part D premiums based on your income. Understanding IRMAA is important because it can significantly impact what you pay for Medicare coverage each month.

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Medicare is designed to help people age 65 and older pay for health care. Most people pay a standard monthly premium for Part B (which covers doctor visits and outpatient services) and Part D (which covers prescription drugs). However, if your income is above a certain threshold, Medicare adds extra charges on top of these standard premiums. These extra charges are your IRMAA.

The income levels that trigger IRMAA are adjusted each year. For 2024, if you are single and your modified adjusted gross income (MAGI) is more than $103,000, you will likely pay IRMAA. For married couples filing jointly, the threshold is $206,000. These income limits change annually, so what applies one year may not apply the next.

IRMAA affects millions of Medicare beneficiaries. According to the Centers for Medicare & Medicaid Services (CMS), approximately 7.2 million people paid IRMAA in 2023. For some beneficiaries, IRMAA adds $70 to $560 per month to their Part B premium alone, depending on their income level. Part D premiums can increase by similar amounts.

The key takeaway: IRMAA is a surcharge on your Medicare premiums triggered by having income above a set amount. It is not a separate program you enroll in—it is automatically applied to your Medicare bill if you meet the income threshold.

How IRMAA is Calculated: Income Thresholds and Brackets

IRMAA uses a specific income measure called Modified Adjusted Gross Income (MAGI). Your MAGI is generally your adjusted gross income from your tax return plus certain tax-exempt interest income. This is the number Medicare uses to determine whether you owe IRMAA and how much.

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Medicare uses tax information from two years prior to determine your current IRMAA. For example, in 2024, Medicare uses your 2022 tax return to calculate IRMAA. This two-year delay means changes in your income take time to show up in your Medicare premiums.

IRMAA is organized into income brackets, similar to income tax brackets. The higher your income, the higher your IRMAA surcharge. In 2024, there are five income brackets for both single filers and married couples filing jointly:

  • Bracket 1: MAGI up to $103,000 (single) or $206,000 (married filing jointly)—no IRMAA
  • Bracket 2: MAGI $103,001–$128,000 (single) or $206,001–$256,000 (married)—lower surcharge
  • Bracket 3: MAGI $128,001–$153,000 (single) or $256,001–$306,000 (married)—moderate surcharge
  • Bracket 4: MAGI $153,001–$178,000 (single) or $306,001–$356,000 (married)—higher surcharge
  • Bracket 5: MAGI above $178,000 (single) or $356,000 (married)—highest surcharge

For 2024, if you are single with a MAGI between $103,001 and $128,000, your Part B IRMAA surcharge is $70 per month. If your MAGI is above $178,000, your Part B IRMAA surcharge is $560 per month. Part D premiums increase similarly across these brackets.

The practical takeaway: Your IRMAA amount depends on your MAGI from two years prior and which income bracket you fall into. Knowing your income level helps you estimate what extra charges you might owe.

Sources of Income That Trigger IRMAA

IRMAA counts many types of income. Understanding what counts is important because some income sources may surprise you. Not all income is treated the same way when Medicare calculates IRMAA.

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Earned income counts toward IRMAA. This includes wages, salary, and self-employment income. If you work part-time or have a small business in retirement, this income will increase your MAGI and potentially your IRMAA.

Investment income also counts. This includes interest from savings accounts, bonds, and CDs. Dividend income from stocks counts as well. Capital gains—the profit you make when you sell an investment for more than you paid for it—count toward IRMAA. Rental income and royalties are included too.

Retirement income counts in most cases. Social Security benefits are included in your MAGI for IRMAA purposes, though only 85% of your benefits count if you are single and earn between $25,000 and $34,000 in MAGI (the rules are different for married couples). Distributions from traditional IRAs and 401(k) plans count as income. Pension payments from former employers count as well.

Some income sources do not count toward IRMAA. Roth IRA withdrawals do not count (though contributions may have counted in prior years). Medicare benefits themselves do not count. Supplemental Security Income (SSI) does not count. Some veterans' benefits may not count, depending on the type. Tax-exempt interest from municipal bonds counts toward IRMAA, even though it is not taxable income.

Here is an example: Sarah is 68 and retired. She receives $2,000 per month in Social Security, $1,200 per month from her pension, and earns $300 per month from a part-time consulting business. She also has $15,000 in investment income from selling stocks. Her total MAGI is roughly $75,000 per year. This puts her below the IRMAA threshold for 2024, so she pays standard Medicare premiums with no surcharge.

Another example: James is 70 and has higher income. He receives $3,000 monthly in Social Security, draws $2,000 monthly from his IRA, and receives $1,500 monthly in pension income. He also earns $40,000 per year from part-time work and has $30,000 in annual dividend income. His MAGI is approximately $185,000 per year. This places him in the highest IRMAA bracket, so he pays an additional $560 per month for Part B and similar amounts for Part D.

The practical takeaway: Most retirement and investment income counts toward IRMAA. Review your income sources to estimate whether you might owe IRMAA. Some income you receive may not count, so learning the rules can help clarify your actual MAGI.

Life Events That May Change Your IRMAA: The Life-Changing Event Process

Life circumstances change, and sometimes those changes affect your income level. Medicare has a process for people who experience certain life-changing events that reduce their income. If your circumstances have changed, you may be able to request a different IRMAA calculation based on your current income rather than income from two years prior.

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Life-changing events recognized by Medicare include marriage, divorce, or death of a spouse. If you marry or divorce, your filing status changes, which can affect your MAGI and IRMAA brackets. The death of a spouse also changes your household income and filing status, often significantly.

Work-related events count as well. If you retire, leave your job, or reduce your work hours, your earned income decreases. If you receive a severance package or take a lump-sum distribution from an employer retirement plan, that can affect your income for that year.

Significant income decreases from investments trigger this process. If you sell a substantial investment at a loss or experience a major decline in dividend income, you may report this. Loss of income from rental property due to selling the property or significant changes in business income can also qualify.

To request a review based on a life-changing event, you contact Social Security (the agency that calculates