Have you heard of IRMAA and how it may affect your Medicare Premiums? Even if you are not in Medicare yet, it is important to plan ahead for IRMAA with your tax preparer.
A few years ago, Congress made some changes to how Medicare premiums are calculated. The goal was to get more money into the Medicare program, but they could not raise the premium significantly due to the “hold-harmless” statute regarding Social Security, which states your net social security premium cannot be decreased. If they increased Medicare premiums deducted from your social security any more than the cost of living increase, you would have a lower net monthly check. So instead, they added a surcharge for high earners. Here is how it works.
Most seniors file income tax married, filing jointly. If the joint MAGI (modified adjusted gross income) is over $170,000 or $85,000 for an individual, Medicare adds a surcharge to both your Medicare Part B premium and your Part D premium. Depending on how much above that threshold you are, the premium increase is anywhere from $65 (Part B and Part D combined) up to $400 per month, per person.
Medicare uses your tax return to calculate the IRMAA premium, but it is a two year look back. If you turn 65 this year, they will be looking at your 2017 return. In many instances, this may mean your or your spouse’s income was higher before retirement, or you sold real estate as you downsized, and that income will now be used to calculate your 2019 Medicare premium.
One way to avoid IRMAA is to plan early. By age 60, you should ask your tax preparer if there are any early disbursements or other strategies that can reduce your taxable income in the years ahead so your Medicare premium will not be subject to the increased premiums.
You do have rights if you don’t believe you should be subject to IRMAA Medicare amounts or want to appeal the decision. If you became married, divorced or widowed, you stopped work or reduced your hours, you lost an income-producing property, etc., you may have a strong case to have the IRMAA waived.
If you feel that one of these situations applies to you, you should contact Social Security to appeal your IRMAA determination. You will need to have appropriate documentation on whichever situation applies to you. There is no guarantee that Social Security will reverse your higher-premium determination, but it is certainly worth a try if one of these situations does apply. We have had clients who have had success in getting IRMAA appealed, reversed or adjusted.