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Will I Avoid IRMAA Surcharges On Medicare Part B & Part D?

Updated: Jun 5, 2023

Planning around Income-Related Monthly Adjustment Amount (“IRMAA”) surcharges have become more important as the Medicare premium increase amount has grown in recent years. While on the surface the concept is pretty straightforward, there are a few issues that can cause an unexpected wrinkle for our clients. It can be difficult to avoid pitfalls and to recognize when a client may be able to request an exception from the IRMAA surcharge.

To help make this easier, we have created the “Will I Avoid IRMAA Surcharges On Medicare Part B & Part D” flowchart. It addresses some of the most common issues that arise for a client on Medicare, including:

  • IRMAA surcharges for Part B and Part D based on MAGI ranges

  • Situations to request an exception and the form to complete

  • Relevant tax year for the surcharge calculation

Tax planning is an essential aspect of financial planning, especially when it comes to making important decisions about retirement savings and investments. One often overlooked consideration in tax planning is the Income-Related Monthly Adjustment Amount (IRMAA), which can have significant implications for Medicare Part B and Part D premiums. In this blog post, we will delve into the intricacies of IRMAA and explain why understanding and incorporating it into your financial planning is crucial for a comfortable retirement.


The Tax Disguised as a Premium: The term "IRMAA" stands for Income-Related Monthly Adjustment Amount, which essentially refers to the surcharges imposed on Medicare premiums based on an individual's modified adjusted gross income (MAGI). While these surcharges are officially referred to as premiums, it is important to recognize them as a form of taxation. Acknowledging this fact helps us understand the significance of IRMAA and its impact on retirement planning.

The Importance of Tax Planning:

Tax planning is an integral part of financial planning, as it helps individuals make informed decisions about managing their income and assets. Neglecting tax implications can lead to unforeseen complications and financial burdens down the line. An example of this is the case of a client who underwent a significant Roth conversion without considering the potential IRMAA surcharges, resulting in unexpected income tax ramifications. Thus, it is crucial to align financial planning with tax planning to make the most informed decisions.

The IRMAA Flowchart:

To navigate the complexities of IRMAA and its potential surcharges, a comprehensive flowchart can be used as a helpful tool. The flowchart addresses various issues related to IRMAA surcharges for Medicare Part B and Part D, exemptions available, and the necessary forms to complete. While requesting an exemption can be challenging, it is possible in certain cases, especially when a client has experienced a life-changing event that significantly reduced their income. Such events can include marriage, divorce, retirement, layoffs, or loss of income-producing property.

Understanding the Income Thresholds:

To determine the IRMAA surcharges, an individual's MAGI from the prior-prior year is taken into account. For instance, for the year 2022, decisions made in the prior-prior year (2020) will impact the surcharges for 2024. The flowchart illustrates the income thresholds that trigger different levels of surcharges, such as $91,000 and $182,000 for individuals and higher amounts for married couples filing jointly. As the income increases, so do the surcharges, often resulting in substantial additional monthly payments.

The Long-Term Implications:

It is crucial to recognize the long-term effects of IRMAA surcharges on retirement planning. These surcharges can significantly reduce an individual's available assets, limiting their ability to enjoy a comfortable retirement. By integrating IRMAA considerations into tax and financial planning, individuals can make better-informed decisions and ensure they have the resources to sustain a dignified retirement.

When engaging in tax planning and making financial decisions, it is vital to consider the potential impact of IRMAA surcharges on Medicare premiums. By understanding the income thresholds, exemptions, and long-term implications, individuals can proactively manage their finances and minimize the tax burden associated with IRMAA. Remember, tax planning and retirement planning go hand in hand, and incorporating IRMAA considerations into your strategy will help ensure a financially secure future.

We hope this blog post has shed light on the importance of understanding IRMAA surcharges and their role in tax and retirement planning. Stay informed, make well-informed decisions, and plan for a comfortable retirement with dignity.

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