2023 IRMAA Brackets: What Are They + How to Avoid IRMAA

Today I’m sharing everything you need to know about the 2022 and 2023 IRMAA Brackets.

I’m also sharing:

• What IRMAA is
• How IRMAA is calculated
• The 10 best ways to avoid IRMAA

If you want to lower your Medicare premiums this year and learn how to reduce IRMAA, you will enjoy this article.

What is IRMAA for Medicare

IRMAA stands for Income-Related Monthly Adjusted Amount. It represents an increase to Medicare Part B and Part D standard monthly premiums and is determined by the Social Security Administration.

In plain English, IRMAA is a pesky fee (a.k.a. surcharge) that Medicare members have to pay each month if they make too much money.

What income is IRMAA based on?

IRMAA is based on your Modified Adjusted Gross Income (MAGI) from two years ago.

In other words, the 2023 IRMAA brackets are based on your MAGI from 2021.

If the 2021 amount is not available, your 2020 MAGI is used.

How is IRMAA calculated?

The IRMAA calculation is based on a Medicare-specific form of MAGI.

(MAGI for IRMAA is different than MAGI for non-healthcare purposes.)

To calculate your MAGI for the 2023 IRMAA brackets, grab your 2021 tax return and locate your Adjusted Gross Income (AGI).

Then, add in tax-exempt interest that has been earned or accrued and interest from U.S. Savings Bonds used to pay for higher education.

You will also need to add earned income while living abroad and income from specific sources not included in your AGI (e.g., Puerto Rico, American Samoa, Gaum, Northern Mariana Islands).

The total amount will represent your 2021 MAGI specific to Medicare and IRMAA in 2023.

The 2022 IRMAA Brackets (Quick Review)

Are you still working on your 2022 tax planning?  If so, here are the 2022 IRMAA brackets for quick reference:

What are the 2023 IRMAA Brackets

As a reminder, your 2021 Modified Adjusted Gross Income (MAGI) determines your 2023 IRMAA bracket.

To break down the 2023 IRMAA brackets (in plain English!):

• If an individual or married couple filing separately makes $97,000+; Or
• A married couple filing jointly makes $194,000+…

…the IRMAA surcharge increases the 2023 Medicare Part B and Part D monthly premiums to the amounts shown below.

IRMAA Case Studies

Let’s review two hypothetical IRMAA case studies showing how the 2023 IRMAA brackets work in practice.

Case Study#1: Mary (Individual Tax Payer)

• Mary’s MAGI was $85,000 in 2021
• She will not be subject to IRMAA in 2023 because her income is below the $97,000 threshold
• Her 2023 Medicare Part B premium will be $164.90 per month (no IRMAA surcharge)
• Her 2023 Medicare Part D premium will be based on what her plan charges (no IRMAA surcharge)

Case Study #2: Bill and Barbara (Married Filing Jointly)

• Their MAGI was $210,000 in 2021
• They will be subject to IRMAA in 2023 because their income is above the $194,000 threshold
• Their 2023 Medicare Part B total premium will be $230.80 per month (base premium of $164.90 + IRMAA surcharge of $65.90)
• Their 2023 Medicare Part D total premium will be the base policy cost (a.k.a. “Plan Premium”) + a surcharge of $12.20 per month

The 10 Best Ways to Avoid (or Reduce) IRMAA

The best way to reduce IRMAA (or avoid it) is to lower your Modified Adjusted Gross Income (MAGI).

Here are some little-known tax-saving tips that can knock down your MAGI and help you potentially escape this surcharge.

1.) Charitable Giving

Charitable giving benefits the non-profit organizations receiving your money. It also benefits you by reducing your MAGI for future IRMAA bracket calculations.

If you are charitably inclined, there are four (4) primary ways to make IRMAA-reducing donations.

Cash Contributions

The first is cash contributions. If you itemize deductions, a cash contribution to a qualified charitable organization will reduce your total taxable income in the year the contribution is made.

However, a cash contribution will not reduce your MAGI for the year. And that’s because the line for charitable deductions falls below the line for AGI on the tax return.

Cash contributions up to 60% of your Adjusted Gross Income (AGI) can be used as an itemized deduction in the current year to help reduce overall taxable income.

This donation method is great for tax planning, but it will not have an impact on your MAGI or on your IRMAA calculation.

Appreciated Assets

Do you have appreciated securities like mutual funds, ETFs, or stocks?

If so, you can donate those appreciated assets directly to charity (as long as they accept gifts in this format).

The amount of the gift is based on the market value of the security on the date the contribution is made. In some cases, appreciated assets such as art, collectibles, and real estate can also be contributed.

Donating appreciated assets does two things:

1. It avoids capital gains tax that the donor would otherwise pay if they sold the asset
2. It provides a tax deduction for taxpayers who itemize

Only point #1 above will help reduce your MAGI. And that’s because capital gains are included in the MAGI calculation.

In other words, avoiding capital gains on a donated asset can help reduce or avoid IRMAA in the current tax year or a future one.

On the other hand, if an appreciated asset qualifies for an itemized tax deduction (point #2 above), your overall taxable income would be reduced but not your MAGI. Similar to cash contributions, the line for charitable deductions falls below the AGI line on form 1040. 

Note: there are limits in terms of the percentage of your AGI that apply here as well. Any excess amount will be carried over to a subsequent year for deduction purposes.

Qualified Charitable Distributions (QCDs)

If you are age 70 ½ or older, you can donate up to $100,000 per year from your Traditional IRA to a qualified non-profit organization. This is known as a Qualified Charitable Contribution or QCD.

If you are charitably inclined and currently subject to Required Minimum Distributions (RMDs), this is a great way to reduce your MAGI for IRMAA purposes in 2023.

QCDs can be used as all or part of your RMD, depending on the amount. This would directly reduce your IRMAA calculation for that tax year. 

There are no taxes on QCDs. (i.e., If you use QCDs for some or all of your RMD in a given year, that money will not be taxed.)

RMDs and the corresponding taxes they trigger are a big reason why Medicare recipients are pushed into a higher IRMAA bracket.

QCDs processed before age 73 — or QCDs in excess of RMD amounts — can help reduce future Required Minimum Distributions. This can, in turn, help reduce your MAGI (and reduce IRMAA!) in future years. 

Donor-Advised Fund (DAF)

A donor-advised fund (DAF) is a type of investment account used for charitable giving purposes only. Many major financial institutions offer DAF giving accounts (e.g., Fidelity Charitable, Schwab Charitable).

You can make lump-sum contributions to a DAF account in the current year, receive a tax deduction for the amount contributed, and then distribute amounts to various charities over time.

Similar to other charitable giving methods mentioned above:

• Contributions to a DAF can be made with cash or appreciated securities
• There are also limits to the percentage of your AGI that can be used as a deduction
• Excess donation amounts can be carried over to subsequent years

A donor-advised fund is a great way to reduce your MAGI and avoid future IRMAA adjustments.

(Nerd note: A DAF can also help you offset a year-end Roth Conversion tax bill 🤓 )

2.) Tax Deductible Retirement Account Contributions

If you have earned income, you can make tax-deductible contributions to a retirement account. Some options include:

• Traditional IRA
• Traditional 401(k), 403(b), or 457 plan
• Solo 401(k)
• SIMPLE or SEP IRA

Making tax-deductible contributions will reduce your MAGI and can help keep you in a lower IRMAA bracket in a subsequent year.

3.) Tax-Free Income

When creating your retirement paycheck, it’s important to be mindful of where you are withdrawing money from. Some withdrawals are tax-free and some are taxable.

By withdrawing money from tax-free sources, you can keep your taxable income low and reduce (or avoid!) IRMAA in 2023.

Here are three (3) examples:

1. Roth IRA: If you’re over age 59 ½ and have satisfied the “five-year rule”, withdrawals from a Roth IRA are tax-free.
2. Reverse Mortgage: Do not get a reverse mortgage just for tax benefits. However, if you have other reasons for securing one, it does provide access to tax-free cash.
3. Permanent Life Insurance: Certain types of permanent life insurance policies allow you to tap into the cash value on a tax-free basis. Before taking action, you will want to understand how this process works for your specific policy and any restrictions that might be in place.

4.) Tax-Efficient Investments

By using tax-efficient investment strategies (in your taxable accounts), you can further minimize taxes. Here are four (4) examples:

1. Avoid high turnover funds. A high turnover fund frequently buys and sells securities on your behalf. This creates unnecessary short-term and long-term capital gains that are passed down to you, the investor.
2. Avoid dividend stocks and dividend funds. While dividends sound nice, they spike your tax bill. High dividend funds are also expensive which is a big reason why, historically, they have not been a good investment. If you want to earn a higher rate of return AND keep taxes low, stay away from high-dividend stocks and funds.
3. Choose ETFs over mutual funds. Mutual funds pass capital gains down to the investors. Even if you don’t trade your mutual fund, you can still be on the hook for unwanted capital gains taxes due to activity inside the fund by the investment manager. In most cases, ETFs avoid this problem and give you control over your capital gains, making them more tax-efficient.
4. Consider asset location. If you have investments in both taxable and tax-advantaged retirement accounts, asset location can help minimize taxes. For example, bonds might be better suited for tax-advantaged retirement accounts because they generate regular taxable income. Growth-oriented or broad-based market funds (e.g., S&P 500 ETF) are often a better fit for taxable accounts. And funds with the highest future return potential (e.g., small-cap value) usually belong in a Roth IRA.

5.) Tax-Efficient Withdrawal Strategies

In retirement, it’s critical to have a withdrawal strategy that generates reliable, tax-efficient income. Here are three (3) things to keep in mind:

1. Avoid withdrawing money without a systematic process in place. Take the time to create a rules-based withdrawal plan documenting where these funds are going to come from and when. At a minimum, review your plan annually. If implemented correctly, you will mitigate taxes, maximize your retirement paycheck, and help ensure you don’t run out of money.
2. Adopt a withdrawal strategy backed by academic research. For example, The 4% Rule, Floor and Ceiling, Guyton’s Guardrails, and Total Return Investing. These are all evidence-based approaches supported by peer-reviewed academic research. Guardrails, in particular, is what’s known as a dynamic withdrawal strategy.
3. Commit to one single approach. Perfect is the enemy of good. While the grass might look greener in a few months (or years), staying committed to your chosen withdrawal plan will put you in the best position for success. Changing withdrawal strategies and chasing shiny objects will typically result in excess fees, more taxes, and lower returns.

6.) Strategic + Informed Tax Decisions

Unlike the direction of the stock market, you can control your tax bill.

By taking control of your tax bill and making informed decisions, you can strategically avoid (or reduce) IRMAA surcharges.

For example, before you blindly sell real estate, take time to review the tax implications of the sale.

In some cases, it might make sense to defer the capital tax into a subsequent year for IRMAA purposes. Or, there might be an opportunity to exchange the property and avoid paying taxes entirely.

7.) Medicare Savings Accounts (MSAs)

MSAs have two components:

1. Medicare Advantage Plan (Part C). This includes a high deductible health plan and only kicks in to pay eligible expenses once the deductible is met.
2. Medical Savings Account (MSA). This is a savings account established at a bank selected by the plan. Medicare contributes a set amount to the account at the beginning of each year. The funds can be used to cover out-of-pocket medical expenses, including those that are not covered by Medicare.

Like an HSA account, any money not used at the end of the year can be carried over to the next year.

Also, the money contributed to the MSA by Medicare is not taxable to you.

Best of all, withdrawals are tax-free as long as the money is used for qualified medical expenses.

8.) Roth Conversions

At age 73, the IRS forces you to begin withdrawing money from your Traditional IRA/401(k) accounts.

These withdrawals are known as Required Minimum Distributions (RMDs) and every dollar distributed is taxed as ordinary income.

These RMDs can be hundreds of thousands of dollars per year, causing unwanted IRMAA surcharges.

To reduce your future RMDs (and your future taxable income!), consider doing Roth conversions during your “gap” years.

A Roth conversion is the process of withdrawing money from your Traditional IRA, paying taxes on the withdrawal, and immediately transferring the dollars to a Roth IRA.

Your gap years are between the date you retire and age 73 (when RMDs begin).

For most retirement savers, income is the lowest during this period of time, allowing them to get money out of their Traditional IRAs at a favorable tax rate via Roth conversions.

9.) Tax Gain Harvesting

A little-known strategy that can be very effective during your retirement gap years is tax gain harvesting.

Long-term capital gains have their own tax bracket. And, depending on your income, you can sell investments with long-term capital gains at a 0% tax rate. (i.e., You don’t pay ANY taxes on the profits.)

For 2022, the 0% bracket for long-term capital gains extends to income up to $41,675 for single filers and up to $83,350 for married filing jointly.

This strategy can help to minimize capital gains that need to be realized in later years when your income includes both Social Security and RMDs.

10.) Life-Changing Event

If you’ve experienced a life-changing event (as defined by the Social Security Administration) AND you are subject to IRMAA in 2023, you can request to have your IRMAA surcharge reconsidered.

If you are impacted by one or more of these life-changing events, you can start the reconsideration process by calling the Social Security Administration at 800-772-1213 and/or completing Form SSA-44.

Listen  about avoiding or reducing IRMAA this year, check out this interview I did

IRMAA Appeal Form and How to Appeal in 2023

Form SSA-44 is the form for IRMAA appeals in 2023.

In addition to the life-changing events listed in the prior section, you can appeal your IRMAA adjustment if you think incorrect data was used to calculate the surcharge.

For example, an amended tax return that was filed and not taken into account for IRMAA purposes by mistake.

The IRMAA appeal process can be started by:

1. Requesting a new “initial determination” from Social Security; Or by
2. Submitting form SSA-44; Or by
3. Calling the Social Security Administration at (800) 772-1213

If your IRMAA appeal is denied, don’t panic. There are several potential levels of the appeal process providing additional opportunities to make your case.

Lastly, there are important deadlines for IRMAA appeals. For example:

• You’re only given 60 days to request an appeal
• The 60-day clock begins on the date you receive your Part D-IRMAA letter
• The Social Security Administration assumes you will receive your letter 5 days after its date/time-stamped

If you are ever in the position to appeal your IRMAA surcharge, be sure you read and understand the entire process upfront so you don’t miss a key deadline.

History of IRMAA

While origin stories are interesting, learning the history of IRMAA can also help us make educated decisions about future adjustments (e.g., 2024 IRMAA brackets and beyond).

When did IRMAA start?

IRMAA was initially enacted in 2003 as a part of the Medicare Modernization Act.

Initially, IRMAA only applied to Medicare enrollees with higher incomes.

The IRMAA brackets were first implemented in 2007.

What changes have been made to IRMAA brackets since 2007?

There have been two big changes to IRMAA since the brackets were first implemented:

1. In 2011, the Affordable Care Act (ACA) expanded IRMAA to include higher-income enrollees in Medicare Part D.
2. In 2018, the Bi-Partisan Budget Act created a 5th IRMAA bracket. The stipulation was that this new bracket would not be increased for inflation until at least 2028.

For the last 14 years (2007-2021), IRMAA surcharges have grown steadily. The increases in the various IRMAA brackets have ranged from 4.73% to 8.02%.

2024 IRMAA Brackets (Projected)

While we don’t have a crystal ball, it’s relatively simple to estimate the projected 2024 IRMAA brackets.

To start, below is an estimate of the 2024 IRMAA brackets assuming 0% inflation.

If inflation is greater than 0%, the 2024 IRMAA brackets will likely be higher.

If inflation is less than 0% (unlikely!), the 2024 IRMAA brackets will likely be lower.

We will know the official IRMAA brackets for 2024 when they are announced later this year.

Remember, IRMAA is based on your income from two years ago. So, your 2022 Modified Adjusted Gross Income (MAGI) will determine your IRMAA adjustments for 2024.

PROJECTED 2024 IRMAA BRACKETS FOR MEDICARE PART B
If your filing status and MAGI in the tax year 2022 was:
File Individual Tax Return	File Joint Tax Return	Married Filing Separate	Part B (Monthly Premium)
$101,000 or less	$202,000 or less	$101,000 or less	2024 Standard Premium
Above $101,000 – $128,000	Above $202,000 – $256,000	N/A	Standard Premium x 1.4
Above $128,000 – $159,000	Above $256,000 – $318,000	N/A	Standard Premium x 2.0
Above $159,000 – $191,000	Above $318,000 – $382,000	N/A	Standard Premium x 2.6
Above $191,000 – $500,000	Above $382,000 – $750,000	Above $101,000 and less than $399,000	Standard Premium x 3.2
Greater than $500,000	Greater than $750,000	$399,000 or more	Standard Premium x 3.4

Note: In 2020, the Medicare Board of Trustees announced projections for future IRMAA adjustments (2021-2028). The adjustments implied a 6.20% inflation rate for Part B and a 6.58% inflation rate for Part D. Of course, things can change significantly between now and the year 2028.

Summary of the 2023 IRMAA Brackets

IRMAA increases Medicare Part B and Part D premiums for high earners. Thankfully, there are a number of strategies you can employ to reduce your MAGI and, in turn, your IRMAA adjustments.

If you only take one thing from this article, it’s that your income this year will have a direct impact on your IRMAA bracket two years from now.

Beyond managing your income appropriately, understanding the basics of Medicare and reviewing your Part D plan (or Medicare Advantage Plan) periodically can also help you save money on your premiums and future out-of-pocket costs.

Additional Medicare IRMAA Resources

• IRMAA Fees in Retirement and How To Avoid Them [The Long Term Investor]
• What You Need to Know About Medicare With Ashby Daniels [Stay Wealthy]
• Will I Avoid IRMAA Surcharges [PDF Flowchart]
• What to Know About Medicare Surcharges [Fortune]

While IRMAA surcharges are pesky, simply understanding if and when they might apply to you can put you in a significantly better financial position. A the end of the day, it might be worth accepting IRMAA for a few years in exchange for reducing your long-term tax bill by six or seven figures via other planning strategies.