Introduction: Understanding Medicare IRMAA 2023 Updates
Did you receive an updated Social Security benefits statement and notice extra premiums for your Medicare Part B & D coverages? If so, you’re not alone, as 7% of Medicare recipients end up paying these additional fees: Medicare IRMAA surcharges.
In 2003, the government introduced Medicare IRMAA. IRMAA stands for “Income-Related Monthly Adjusted Amount.” It’s an acronym for calculating whether you get to pay the standard Medicare rates or if you’ll have to pay an extra “surcharge” on your Medicare premiums. It’s important to note that surcharges could apply to those with Traditional Medicare and Medicare Advantage plans.
Overview of the IRMAA Changes for 2023
The Centers for Medicare & Medicaid Services (CMS) has announced the updated figures for the Medicare Part A and B programs for the upcoming year 2023.
On September 27, 2022, the agency released the premiums, deductibles, and coinsurance rates for the Part A and B programs, as well as the Medicare Part D income-related monthly adjustment amounts (IRMAA) for 2023.
2023 IRMAA Brackets
- Individual $97,000 or less/MFJ $194,000 or less – No surcharge
- Individual $123,000 or less/MFJ $234,000 or less – Medicare Part B $230.80 plus $12.20 for Medicare Part D
- Individual $153,000 or less/MFJ $306,000 or less – Medicare Part B $329.70 plus $31.50 for Medicare Part D
- Individual $183,000 or less/MFJ $366,000 or less – Medicare Part B $428.60 plus $50.70 for Medicare Part D
- Individual $500,000 or less/MFJ $750,000 or less – Medicare Part B $527.50 plus $70.00 for Medicare Part D
- Individuals greater than $500,000/MFJ greater than $750,000 – Medicare Part B $560.50 plus $76.40 for Medicare Part D
As you can see in the table above, in 2023, the surcharge kicks in for singles with a Modified Adjusted Gross Income (MAGI) of more than $97,000 and couples with an income of more than $194,000. The surcharge continues to increase at higher MAGI levels.
IRMAA Calculation
It’s important to note that the IRMAA is based on the Modified Adjusted Gross Income (MAGI) reported on your federal income tax return from two years prior to the current year. so the IRMAA bracket for 2023 will be based on the MAGI reported on the federal income tax return of 2021.
This surcharge is also known as a “cliff tax.” With a cliff tax, you must pay the added surcharge premiums if your MAGI is just $1 over the thresholds.
For example, the first MAGI threshold for a single tax filer in 2023 is $97,000. Suppose a single tax filer’s 2021 MAGI was just $1 over the threshold ($97,001). In that case, Medicare adds the full additional $65.90 a month to the $164.90 base Medicare Part B premium and $12.20 a month to your Medicare Part D premium.
It’s also important to note that the IRMAA is based on the Modified Adjusted Gross Income (MAGI) reported on your federal income tax return from two years prior to the current year. so the IRMAA bracket for 2023 will be based on the MAGI reported on the federal income tax return of 2021.
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 to Appeal IRMAA Determinations in 2023
If you are required to pay an Income-Related Monthly Adjustment Amount (IRMAA) surcharge as part of your Medicare Part B (medical insurance) or Part D (prescription drug coverage) premiums, you may be able to appeal the surcharge if your income or financial situation has changed through a “qualifying event.”
A “qualifying event” is a change in circumstances that may affect the beneficiary’s income or tax filing status and may qualify the beneficiary for a reduction or elimination of the IRMAA surcharge. Some examples of qualifying events include:
- Marriage, divorce, or death of a spouse
- Loss of income-producing property
- Retirement
- Change in employment status
- Loss of pension income
- Change in tax filing status
It’s important to note that the list is not exhaustive, and a beneficiary may appeal an IRMAA surcharge based on other changes in circumstances that may affect their income.
To appeal the IRMAA surcharge, you must complete the Medicare IRMAA Life Changing Event Form. The medicare irmaa life-changing event form (FORM SSA-44) includes complete instructions to file an appeal, the documentation needed, and where to send your appeal form.
In addition, you may contact the Social Security Administration at 1-800-772-1213 (TTY: 1-800-325-0778). You will need to provide documentation to support your appeals, such as tax returns, wage, and earnings statements, or other financial documents.
How do I avoid IRMAA?
Fortunately, through proactive tax planning, it’s possible to predict whether you will likely be caught in the IRMAA trap. You may even be able to take action to reduce future 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!
Remember, IRMAA is calculated on Modified Adjust Gross Income. Therefore, you must reduce or shift income, if possible. If you own mutual funds in taxable accounts that tend to distribute high year-end capital gains, consider moving into tax-efficient funds. In addition, consider donating to charity through Qualified Charitable Distribution for those subject to Required Minimum Distributions.
Maximize Your Savings with Tax Planning and Projections
Don’t miss out on the opportunity to keep more of your hard-earned money! RCS Financial Planning specializes in tax planning and projections for our retired clients, which are key in creating a strategy to lower your taxes and Medicare premium surcharges. Schedule your introductory call with us today and let us show you how we can help you save on your costs.