Possible 2025 IRMAA Brackets
For retirees in Medicare the tax of IRMAA is happening and at a more alarming rate than ever before, so much so that the future of IRMAA will impact many more retirees than anyone is planning for. The 2025 IRMAA brackets are expected to affect even more retirees than the current brackets. Each IRMAA tier has a corresponding marginal tax rate that determines the additional premium part B and part D surcharges.
In 2007, when IRMAA first came into existence, roughly 1.7 million Medicare beneficiaries were hit with this tax.
Today, in 2023, the amount of people in IRMAA is over a staggering 6.8 million. This is an increase of 9.00% annually from 2007 and the future doesn’t look like it will decrease either.
What is the Future of IRMAA?
According to recent reports from the Trustees of Medicare, by 2030 there will be at least 12.8 million or 25% of all eligible Medicare beneficiaries in IRMAA.
This amount of Medicare beneficiaries who will be in IRMAA, according to the Trustees, must occur, regardless of what the IRMAA thresholds may become as the program itself (Medicare) will be insolvent in just a few years without it.
IRMAA is simply a revenue source for both the Medicare and Social Security programs, without it both programs will be in serious jeopardy. The Social Security Administration uses your modified adjusted gross income (MAGI) to determine your IRMAA tier and corresponding marginal tax rate.
What is IRMAA?
IRMAA, short for Medicare’s Income Related Monthly Adjustment Amount, is a surcharge on to of Medicare Part B and D premiums for those who earn to much income. The income-related monthly adjustment amount (IRMAA) is based on your modified adjusted gross income.
IRMAA is a tax on income.
If you earn an income over a certain limit, then your Medicare premiums will increase accordingly. The more you make in oncome the higher your premiums will be. Your adjusted gross income, as reported on your tax return, is used to determine if you are subject to the income-related monthly adjustment amount. The marginal tax rate for IRMAA can be as high as 85% for the highest income tier.
Compounding this issue of IRMAA and its surcharges is that any surcharges you are hit by will reduce your Social Security benefit too.
You pay for your IRMAA surcharges through your Social Security benefit.
So, the more income you earn in retirement the more your Medicare premiums will be and the lower your Social Security benefit will be too. For married couples filing jointly, the IRMAA threshold is higher than for single filers. The Social Security Administration determines your IRMAA tier and premium part B and D surcharges based on your taxable income.
IRMAA 2025 and into the Future:
Today, in 2024, the IRMAA Thresholds and surcharges are:
| Single | Couple MAGI | Part B | Part D |
|---|---|---|---|
| < $103,000 | < $206,000 | $174.70 | Premium (varies) |
| $103,000 to $129,000 | $206,000 to $258,000 | $244.60 | $12.90 |
| $129,000 to $161,000 | $258,000 to $322,000 | $349.40 | $33.30 |
| $161,000 to $193,000 | $322,000 to $386,000 | $454.20 | $53.80 |
| $193,000 to $500,000 | $386,000 to $750,000 | $559.00 | $74.20 |
| > $500,000 | > $750,000 | $594.00 | $81.00 |
By next year the Thresholds, if inflation remains constant, IRMAA 2025, according to the Trustees of Medicare, will increase to:
| Single | Couple MAGI | Part B | Part D |
|---|---|---|---|
| < $105,000 | < $210,000 | $185.00 | Premium (varies) |
| $105,000 to $131,000 | $210,000 to $262,000 | $259.00 | Premium + $13.70 |
| $131,000 to $163,000 | $262,000 to $326,000 | $369.90 | Premium + $35.30 |
| $163,000 to $196,000 | $326,000 to $392,000 | $480.80 | Premium + $57.00 |
| $196,000 to $500,000 | $392,000 to $750,000 | $591.90 | Premium + $78.60 |
| > $500,000 | > $750,000 | $628.90 | Premium + $85.80 |
How many people will reach IRMAA 2025?
The Trustees of Medicare are reporting through its annual report that next year IRMAA 2025 will impact roughly 8.3 million retirees. This is an increase of over 10% from 2023 annually.
These 8.3 million retirees who will hit IRMAA 2025 will pay an extra $23.7 billion in surcharges because they earn too much income, and the amounts are just going to get bigger each year.
IRMAA is a revenue generator for both the Medicare and Social Security programs. The marginal tax rate for each IRMAA tier determines the premium part D surcharge and total drug costs in the coverage gap.
What is income for IRMAA 2025?
When it comes to IRMAA 2025 everything is about your income and the government defines your income as your adjustable gross income (AGI) plus any tax-exempt intertest you may have. Your modified adjusted gross income is used to determine if you are subject to IRMAA surcharges.
To figure out your amount of IRMAA income simply look at lines 2a and 11 of your 2022 IRS form 1040. Your gross income, which includes all taxable income before any deductions, is the starting point for calculating your adjusted gross income. Your IRMAA tier and marginal tax rate are based on your taxable income.
Some examples of income that the government counts towards IRMAA are:
| Wages | Traditional IRA Distributions |
| Rental & Pension Income | Traditional 401(k) Distributions |
| Interest | Traditional 403(b) Distributions |
| Capital Gains | Qualified Annuity Income |
| Dividends | Taxable Social Security benefits |
For a more comprehensive list of the income that counts towards IRMAA please click here.
How the IRMAA Brackets adjust:
When Congress created Medicare IRMAA back in 2003 through the passing of the Medicare Moderniztion Act, they ruled that the IRMAA Brackets would adjust by
“The percentage (if any) by which the average of the Consumer Price Index for all urban consumers (United States city average) for the 12-month period ending with August of the preceding calendar year exceeds such average for the 12-month period.”
So, if the CPI-U at the end of August of the current year is greater than the previous August then the IRMAA Brackets will increase. Note the inflation rate does not determine IRMAA costs.
By the way there is no language that would stop the IRMAA Brackets from going down if the CPI-U would actually deflate from year to year. The IRMAA threshold is the income level above which IRMAA surcharges apply. Each IRMAA tier above the threshold has a higher marginal tax rate.
In terms of the all the thresholds within the IRMAA Brackets, due to the passing of the Bi-Partisan Budget Act of 2018 the 5th Threshold in the IRMAA Brackets will not adjust for inflation until 2028. The total part B premium, including the IRMAA surcharge, can be as high as $628.90 for the top IRMAA tier in 2025.
Conclusion of IRMAA 2025
With Medicare reportedly going insolvent and the federal government getting deeper into debt the hidden tax of IRMAA is NOT going to go away any time soon.
The federal government is clearly reporting that surcharges that coincide with IRMAA will increase year after year and this must happen.
At stake is your income, your Social Security benefit and your retirement. IRMAA’s surcharges are based on your modified adjusted gross income and can significantly increase your total drug costs.
The only way to completely avoid IRMAA is to ensure that your income is not visible to the federal government. This means utilize Roth Accounts, Life Insurance and Non-Qualified Annuities whenever possible.
For more information on IRMAA and how to plan for it please contact an IRMAA Certified Professional in your area (directory).
GOING TO DO TO YOU?
Did you receive an IRMAA Letter from Medicare or Social Security?
Do you know how IRMAA will affect your entire retirement?
Has your financial professional ever shown you what the impact could be?
Streamlining the Medicare Surcharge Calculation Process.
Our Healthcare Retirement Planner software is designed to streamline the retirement planning process for financial professionals. By providing an efficient way to calculate IRMAA costs, our tool helps you save time and focus on other aspects of your clients’ retirement plans.
- Faster calculations: Our software quickly calculates IRMAA costs based on your client’s income and tax filing status, eliminating manual calculations and potential errors.
- User-friendly interface: The intuitive design of our platform makes it easy for financial professionals to input data and generate results with minimal effort.
- Data integration: Seamlessly integrate our calculator into your existing financial planning tools or CRM systems for a more streamlined workflow.
- Easy to Understand Reports: Export reports to easily share with your clients
- Tax and Surcharge Modeling: see how different types of income affects both taxes and your surcharges.
In addition to simplifying the calculation process, using our Healthcare Retirement Planner can also help improve communication between you and your clients. With clear visuals that illustrate how IRMAA costs impact their overall retirement plan, you can effectively convey complex information in an easily digestible format. This enables clients to make informed decisions about their healthcare expenses during retirement while ensuring they are prepared for any potential changes in Medicare premiums due to income fluctuations. To learn more about how our software can benefit both you as a financial professional and your clients’ retirement planning experience, visit the features page. Streamlining retirement planning processes can help financial professionals save time and resources, allowing them to focus on other areas of their clients’ needs. Automated calculation of IRMAA costs is the next step in streamlining this process even further.
