What is IRMAA? How to Avoid Medicare Premium Surcharges in 2025

couple learning about IRMAA Medicare Premiums

Have you heard of IRMAA Medicare premiums? Did you know the Social Security Administration can charge you more for your Medicare premiums if you make over a certain amount of money? It surprises a lot of people. Especially new retirees who suddenly see a higher Medicare bill.

We’re covering everything you need to know about IRMAA (Income-Related Monthly Adjustment Amount), including how it affects your Medicare Part B (medical insurance) and Medicare Part D (prescription drug coverage) premiums. Even better? Learn how you can potentially appeal IRMAA and pay significantly less or nothing, depending on how much you’re making in retirement.

Why IRMAA Exists

IRMAA exists because Medicare premiums are income-based. The Social Security Administration uses your tax information from two years ago to decide whether you should pay an income-related adjustment. The idea is that higher earners contribute more toward the cost of their coverage.

How Modified Adjusted Gross Income (MAGI) Impacts Your Medicare Premiums

IRMAA is based entirely on your Modified Adjusted Gross Income (MAGI), and that number determines whether you’ll owe an additional charge on your Medicare Part B and Part D premiums. The higher your income, the higher your IRMAA Medicare premiums will be.

There are six different income thresholds. Each one increases your premium amount in steps. These thresholds are updated each year, so the limits for 2025 are different from those used in 2023 or 2024. Your MAGI starts with your Adjusted Gross Income (AGI) from your tax return, but then you have to add back certain types of income that were excluded from your AGI.

Some examples of what gets added back include:

Untaxed portions of your Social Security benefits
Tax-exempt interest income

If your MAGI is under a certain amount, you likely won’t be subject to any IRMAA at all. That amount is under $206,000 for Married Filing Jointly MAGI and under $103,000 for Single MAGI. If you’ve recently retired and your income has gone down significantly, you might still receive an IRMAA letter saying you owe an amount that no longer applies to you.

What Happens If You Disagree With the Income on the IRMAA Statement?

If you don’t believe you should be in this threshold, there’s a way that you can appeal your IRMAA. You should consider appealing IRMAA when the income Social Security used to calculate your Medicare premiums doesn’t reflect your current situation anymore. If you qualify for one of the seven qualified events, you can potentially win your appeal.

Here’s a list of the seven qualifying events that could allow you to appeal your IRMAA.

Marriage
Divorce/Annulment
Death of your Spouse
Work Stoppage
Work Reduction
Loss of Income-Producing Property
Loss of Pension Income
Employer Settlement Payment

One of the most common events for retirees is work stoppage, or in other words, retirement. You might have received an IRMAA notice showing you owe extra premiums based on income that no longer applies to you.

Why IRMAA Notices Use Outdated Income

It can be alarming to receive a letter about your IRMAA Medicare premiums that isn’t up to date. The Social Security Administration uses your tax return from two years ago to determine your current IRMAA. If you’re looking at an IRMAA statement for 2025 at the end of 2024, they’re going to be basing your 2025 IRMAA off of your 2023 tax return. If your income has truly gone down, you can appeal. You’ll need to provide documentation showing that your current income is lower than the income they used to calculate your IRMAA.

How to Appeal IRMAA Without a Recent Tax Return

What happens if you don’t have a tax return that proves you have a lower income? Don’t worry. You can still build a case for yourself to show that you will have less income. Let’s say you retired at the end of this year, and you know your income next year will be much lower.

You can submit a letter from your employer that says:

Your salary was a certain amount before retirement
You no longer work there as of a specific date
The letter must be signed by the employer

That letter can help you show the Social Security Administration that your income will be significantly lower going forward. You don’t need to have your new tax return ready yet. You just need solid proof that your income has changed.

Tip: Be Careful When Estimating Income

If you decide to appeal, be careful not to understate your income. Social Security can come back later and bill you for the difference.

Let’s say you estimate your income will be around $150,000, but you decide to take on some consulting work and end up earning $250,000. When you file taxes, Social Security will see that your income was higher than expected, and they’ll send a bill for the extra IRMAA you owe. Be honest and realistic about your projected income when you file your appeal to avoid headaches.

IRMAA Appeal Example

The IRMAA Medicare premiums apply to both spouses enrolled in Medicare. Here’s an example:

Let’s say we have two spouses, both 65, who retired last year. The Social Security Administration assumes their income is in the second-highest threshold, between $386,000 and $750,000 for 2024. They’re estimated to have $500,000 in total income, and both have retired, so their income is now below $206,000.

Based on that, they would each pay:

$384 extra for Medicare Part B
$74 extra for Medicare Part D

That’s a total of $458 per person per month. Multiply that by two, and the couple is paying $916 per month, or $10,992 per year in additional IRMAA Medicare premiums, on top of regular Medicare costs. If their income has now dropped below $206,000, they shouldn’t be paying those higher premiums anymore. It’s in their best interest to appeal.

How to File an Appeal

You’ll use Form SSA-44, available on the Social Security website. The form asks for your reason for requesting a new determination (for example, “work stoppage”) and your estimated income for the year. Attach all your supporting documents and either mail them or deliver them to your local Social Security office.

What Supporting Documentation Do You Need During the Appeal Process?

When you go through the IRMAA Medicare premiums appeals process with the SSA, you’ll need to provide some documentation to prove your case. You must provide evidence of your modified adjusted gross income (MAGI) and your life-changing event.

There’s not always a lot of clarity around what qualifies as supporting documentation. Here are a few examples:

If it’s due to the death of a spouse, include a copy of the death certificate.
If it’s due to retirement, include a letter from your employer confirming that you no longer work there.
If you’ve sold an income-producing property, include a bill of sale and show the section of your previous tax return where that property’s income appeared.

What Happens After You File?

After you submit your appeal, Social Security reviews your documents and issues a new determination. If approved, your Medicare Part B and Part D premiums are adjusted automatically, and you’ll receive a letter confirming the new rate. If denied, you can request a reconsideration and submit additional proof of your income change. Many people succeed on the second try after adding more documentation.

Why Appealing IRMAA Medicare Premiums Matters

Appealing IRMAA is worth your time because the savings can be significant. For some people, it’s the difference between paying a few hundred dollars a month and paying nothing extra at all. Even if your appeal doesn’t fully remove the charge, getting moved to a lower bracket can still save you thousands of dollars per year.

Remember, IRMAA isn’t permanent. It’s recalculated each year when Social Security receives your latest tax return. Once your income consistently falls below the threshold, the adjustment is automatically removed.

How Paces Ferry Wealth Advisors Can Help

Navigating IRMAA and Medicare premium surcharges can feel complicated, especially when your income changes after retirement. If you’ve retired or had a major life change, you have the right to ask for a new review. A simple appeal with clear documentation could save you thousands of dollars each year on your Medicare premiums.

That’s where our team at Paces Ferry Wealth Advisors can help. We work with retirees every day to help them navigate finances during retirement. If you’d like help reviewing your current situation or planning your financial future, contact Paces Ferry Wealth Advisors to schedule a call. We’re here to help you make smart, confident financial decisions in retirement.

Paces Ferry Wealth Advisors, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”). This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.

Zachary Morris, CFP®

Having traveled to over 35 countries, Zach is a believer in Ralph Waldo Emerson’s statement that Life is about the journey, not the destination. Being a CERTIFIED FINANCIAL PLANNER™ provides Zach the opportunity to help clients define and realize their journey, and co-founding Paces Ferry Wealth Advisors, an independent firm, allows the freedom to define the client experience along the way.