If you’re a Medicare enrollee with a high income, you may face an income-related surcharge on your Medicare Part B and Part D premiums. But some Medicare enrollees are able to avoid having to pay this surcharge through strategies that reduce their household income.
Medicare surcharges called IRMAAs apply to higher earners
Medicare enrollees typically don’t have to pay a premium for Medicare Part A, which covers hospital care. But there are premiums associated with Medicare Part B – which covers outpatient care – as well as Medicare Part D prescription drug plans. The standard monthly Part B premium changes annually and is currently $185. The amount of Medicare Part D premiums are plan-specific.
But depending on your income, you may be assessed a surcharge on your Part B and Part D premiums known as an income-related monthly adjustment amount, or IRMAA. IRMAAs are calculated based on a form of your modified adjusted gross income (MAGI) from two years prior. Whether you’ll be impacted by an IRMAA in 2025, for example, hinges on your income from 2023. (If your income or circumstances have changed, however, you can file an appeal with the Social Security Administration and ask them to reduce or remove your IRMAA surcharge.)
In 2025, IRMAAs are not applicable if you’re an individual tax-filer with a MAGI of $106,000 or less, or a joint filer with a MAGI of $212,000 or less. Since 2020, these thresholds have been indexed annually for inflation, and have increased each year.
Although IRMAAs only impact approximately 8% of enrollees in each of Medicare Part B and Part D, not having to pay them – even temporarily – could result in significant reductions in the amount of your Part B and Part D premiums. You may want to work with a financial advisor or tax planner to discuss whether any of these strategies could reduce your IRMAA-specific MAGI so that you don’t have to pay an IRMAA surcharge.
1. Make qualified charitable distributions
Charitable donations on their own do not reduce your MAGI. But making what are known as qualified charitable distributions (QCDs) could.
If you have a traditional IRA, you’re required to take required minimum distributions (RMDs) beginning at age 73 if you were born between 1951 and 1959, or starting at age 75 if you were born in 1960 or later. RMDs count toward your MAGI. But a QCD, which has you making a direct donation from your IRA to a registered charity, does not count as taxable income and can therefore reduce your MAGI., making an IRMAA less likely.
2. Make Roth conversions
Converting a traditional IRA or 401(k) to a Roth account prior to retirement could help you avoid IRMAAs by making your retirement plan withdrawals after retirement tax-free. But Roth conversions create a tax liability the year you make them. So be aware that if you convert funds to a Roth IRA or Roth 401(k) too close to when you’re eligible for Medicare, you could actually raise your likelihood of facing an IRMAA two years later due to the increase in your taxable income in the year you made the conversion. Work with a tax professional to carefully time your conversions.,
3. Max out traditional IRA or 401(k) contributions
Medicare eligibility generally begins at age 65, and you’re allowed to sign up even if you’re still working and have access to a group health plan. But if you’re still earning an income, it means you may be eligible to contribute to a traditional IRA or 401(k).
If so, maxing out those contributions does the job of reducing your taxable income. That, in turn, lowers your MAGI, which could mean avoiding having to pay an IRMAA surcharge two years down the road.
4. Delay collection of Social Security benefits
Social Security eligibility begins at 62, and many seniors start collecting benefits before they enroll in Medicare. If you delay your Social Security claim, not only can you lock in a larger monthly benefit for life, but you could avoid having to pay an IRMAA surcharge, at least for a period of time.
If you’re not collecting Social Security at the time of your Medicare enrollment or in the years leading up to it, that reduces your likelihood of having to pay a Part B or D surcharge by virtue of lowering your income.
On the flip side, though, once you do claim Social Security, you’ll have a larger monthly benefit for a delayed filing. That increased income could put you at risk of IRMAAs down the line, so this may only be a temporary solution. Note that delayed retirement credits for Social Security stop accruing at age 70, so the strategy of postponing your filing will only work for so long.
This article is intended for educational purposes only and is not tax advice. For guidance on your personal situation, please contact a tax professional or financial advisor.
Maurie Backman has been writing professionally for well over a decade, and her coverage area runs the gamut from healthcare to personal finance to career advice. Much of her writing these days revolves around retirement and its various components and challenges, including healthcare, Medicare, Social Security, and money management.
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Tags: income, irmaa
