What Causes IRMAA To Increase?

Healthcare is one of the largest expenses for retirees. Without careful planning, these costs can compound over time and put a large dent in your retirement income. One example is the Medicare income related monthly adjustment amount (or IRMAA), which affects high net worth retirees.

Here is a look at how IRMAA works, what causes it to increase, and how high-income retirees can mitigate its effects.

What Is IRMAA And How Does It Work?

IRMAA is an additional charge in Medicare to ensure that retirees with higher incomes pay higher premium costs. Once your taxable income increases above a certain threshold, IRMAA kicks in. This charge applies to Medicare Part B (which covers outpatient care) and Part D (which covers prescriptions).

IRMAA is based on your modified adjusted gross income (MAGI) on your tax return from two years ago. In other words, the 2027 IRMAA charge will be based on the MAGI on your 2025 tax return.

The IRMAA surcharge only applies to high income retirees and gets added on top of your base premiums. Married couples get charged individually, so their costs can potentially double. If these situations apply to you, it’s important to be aware of IRMAA and the factors that make it kick in and increase.

The IRMAA surcharge increases when your income crosses certain thresholds based on your tax returns from two years prior. Even if you exceed a threshold by just one dollar, you can trigger a higher surcharge for your Medicare Part B and Part D premiums.

Common events that bump your income and trigger an IRMAA increase include:

Large IRA or 401k withdrawals: Taking out extra funds for major expenses (like a new car or home project) adds to your taxable income.
Social Security benefits: The taxable portion of your benefits, which can be up to 85% of your payout, is included in your MAGI and can push you into a higher IRMAA bracket
Roth conversions: Moving significant funds to a Roth IRA creates a major taxable event that year.
Capital gains: Selling stocks, bonds, or real estate at a profit increases your reported income.
Business or property sales: Large, one-time profits from liquidating assets or a business are counted in your MAGI.
Required Minimum Distributions (RMDs): Once you reach RMD age, mandatory withdrawals from retirement accounts can push you into a higher IRMAA bracket.

Is IRMAA Calculated Every Year?

Yes, IRMAA is calculated each year based on your tax return from two years ago. If your 2024 income was over $109,000 for a single person or $218,000 for a married couple, you would be over the threshold and have gotten an IRMAA surcharge for 2026.

Because Medicare recalculates the IRMAA surcharge each year, a one-time spike in income (like from selling your house or a large capital gain) would only affect you in two years’ time.

Is IRMAA Tax Deductible?

Yes, IRMAA surcharges are tax-deductible. The IRS treats them as part of your regular Medicare premiums. However, claiming this deduction has two requirements:

Only for itemized deductions: You can only claim this if you itemize your taxes rather than take the standard deduction.
Threshold limitation: You can only deduct the portion of your total medical expenses that exceeds 7.5% of your adjusted gross income.

If you are self-employed, you may be able to deduct these premiums for yourself and your spouse without itemizing or meeting the 7.5 threshold.

Does My IRMAA Bracket Ever Go Down?

IRMAA charges are not permanent: they can be reduced, avoided altogether, or appealed in some cases. Just like your tax bracket, your IRMAA bracket will go down if your income drops.

This is tied to the concept of ‘income smoothing’ in wealth management, or planning your taxable income in a consistent way over time to prevent large spikes and increased costs. For example, you would want to plan out your withdrawals and required distributions evenly ahead of time so they aren’t lumped together in one expensive tax year (and a large IRMAA surcharge two years later).

How To Appeal An IRMAA Surcharge

If you recently experienced a qualifying life-changing event (such as retirement, divorce, or the death of a spouse), you can request an appeal of your IRMAA surcharge using Form SSA-44. You will have to submit proof of your recent life event along with this form.

How To Avoid IRMAA For Retirees

If you want to preserve wealth in retirement, you need to avoid getting hit with unexpected tax expenses like IRMAA surcharges. In order to reduce your taxable income, there are some steps you can take with the help of a financial planner:

Consider delaying Social Security benefits. If you wait until you are 70 to start Social Security, you can significantly increase your monthly benefits, and you will also have a lower taxable income in the earlier years of retirement.
Plan ahead for your Required Minimum Distributions (RMDs). By planning ahead, you can start taking required withdrawals from your retirement accounts earlier in smaller, more manageable amounts to lessen their impact.
Take advantage of your early retirement window. If you retire before you start taking benefits, you can have more flexibility in how you withdraw money, and can take strategic withdrawals to avoid moving into a higher tax bracket.
Coordinate your withdrawals. In simple terms, that means balancing distributions from retirement accounts, brokerage accounts, and other income sources to avoid big jumps in taxable income.
Consider Qualified Charitable Distributions (QCDs). If you’re 70½ or older, you can donate up to $100,000 directly from your IRA to a charity, and this donation will count toward your RMD but will not be included in your taxable income. This allows you to support a good cause while reducing your tax liability at the same time.

Want to learn more about IRMAA surcharges and how to reduce them? Contact Zynergy Retirement Planning today.