Medicare IRMAA 2022 - Updated Thresholds and Surcharges

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2022 Medicare IRMAA Updates

Introduction

Most Medicare beneficiaries pay the standard premium for their Part B and Part D (prescription drugs) coverage. But, 7% of Medicare recipients end up paying extra fees: Medicare IRMAA surcharges. 

IRMAA stands for “Income-Related Monthly Adjusted Amount.” It’s an acronym for a calculation that determines whether you get to pay the standard Medicare rates or if you’ll have to pay an extra "surcharge" on your premiums. It's important to note surcharges could apply for those with Traditional Medicare as well as those with Medicare Advantage plans.

Fortunately, it’s possible to predict whether you’re likely to be caught in the IRMAA trap. And there are avenues you can pursue to dispute your determination.

What Is the Income-Related Monthly Adjusted Amount?

Starting in 2003, the U.S. government began collecting a surcharge from Medicare beneficiaries with higher incomes. This surcharge is calculated based on your modified adjusted gross income two years prior. For example, your Modified Adjusted Gross Income from 2020 determines your IRMAA determination for 2022. Therefore, if your 2020 MAGI was above the threshold, you would pay the surcharges in 2022. 

Retirees must focus on short- and long-term tax planning to account for possible surcharges. The decisions you make this year could affect your 2024 Medicare Part B and Part D premiums! 

How does the Federal Government calculate Medicare IRMAA?

The United States government calculates your Medicare IRMAA by looking at your Modified Adjusted Gross Income two years prior. The Internal Revenue Service shares this information directly with the Social Security Administration.

For the current year, 2022, the IRS and Social Security Administration will use your 2020 MAGI.

To calculate your MAGI, start with your total income from line 9 on your 1040 tax return. Next, subtract any adjustments to income (line 10), then add any tax-exempt interest from line 2a. The resulting number is your Modified Adjusted Gross Income and the figure used to determine your possible IRMAA surcharges. 

How much are Medicare IRMAA Surcharges for 2022?

The Medicare IRMAA income bracket surcharges for 2022 are as follows:

Medicare IRMAA 2022

As you can see in the table above, in 2022, the surcharge kicks in for singles with a Modified Adjusted Gross Income (MAGI) of more than $91,000 and couples with an income of more than $182,000. The surcharge continues to increase at higher MAGI levels.

This surcharge is also known as a "cliff tax." With a cliff tax, if your MAGI is just $1 over the thresholds, you must pay the added surcharge premiums. 

For example, the first MAGI threshold amount for a single tax filer in 2022 is $91,000. Suppose a single tax filer's 2020 MAGI was just $1 over the threshold ($91,001). In that case, Medicare adds the full additional $68 a month to the $170.10 base Medicare Part B premium and $12.40 a month to your Medicare Part D premium.

The good news is, through proper tax planning, there are ways to reduce or even eliminate your IRMAA surcharges. Your current Financial Advisor should proactively work with you to project your short and long-term taxes. And together, you should develop strategies to reduce your future taxes and possible surcharges. If your Financial Advisor cannot do this, please schedule a 15-minute introductory call with us!

How often do Medicare IRMAA rates change?

Medicare IRMAA rates and MAGI thresholds are usually announced in October and take effect on January 1 of the following year. Therefore, we do not yet know the MAGI thresholds or surcharge amounts for 2023. But we do know the government will use your 2021 MAGI as the basis for any possible surcharges.

Can I appeal my Medicare IRMAA surcharge?

If you disagree with your surcharge, you have the right to appeal. However, there are limited situations that qualify for an appeal:

  • Inaccurate or out-of-date tax returns. Examples include:
    • You filed an amended tax return for the determination year
    • There is an IRS data error
    • The IRS provided incorrect information to Social Security
  • You experienced a qualifying life-changing event:
    • Death of a spouse
    • Marriage
    • Divorce
    • Work reduction
    • Work stoppage, or retirement
    • Loss of income from income-producing property
    • Loss of certain pension incomes

To appeal the IRMAA surcharge, you must complete the Medicare Income-Related Monthly Adjustment Amount - Life-Changing Event form SSA-44. This form includes complete instructions to file an appeal, the documentation needed, and where to send your appeal form.

Conclusion

As you can see, the IRMAA surcharges can be significant, so it's essential to understand how they're calculated and plan ahead. As mentioned, proper tax planning and projections are crucial to developing strategies to reduce your overall taxes and your potential Medicare premium surcharges. In addition, knowing what to expect can help you budget for your health care costs in the years ahead!