Medicare Part B and Part D surcharges.

What IRMAA actually is

IRMAA is the Income-Related Monthly Adjustment Amount. It is a surcharge that the Social Security Administration adds to a Medicare beneficiary's Part B and Part D premiums when modified adjusted gross income exceeds published thresholds. There are five surcharge tiers above the base Part B premium. Every Medicare beneficiary in a household pays their own surcharge, so a married couple both enrolled in Medicare pays IRMAA twice when their joint income crosses a bracket.

The two-year lookback

IRMAA in 2025 is based on the modified adjusted gross income reported on the 2023 federal tax return. This two-year lag has two important implications. First, a single large income event today (a Roth conversion, the sale of a business, a large capital gain, a real estate sale) creates an IRMAA surcharge that arrives two years later, often after the client has already forgotten about the underlying transaction. Second, an income drop (retirement, business closure) does not lower IRMAA for two years unless the client files SSA-44 for a qualifying life-changing event.

The cliff nature of IRMAA

Unlike an ordinary tax bracket, IRMAA is a cliff. One dollar of income over the threshold does not add a marginal 22% or 24% tax on that dollar; it moves the beneficiary into the next full surcharge tier for the entire calendar year. At the middle tiers that can mean an additional several thousand dollars per person per year in Medicare premiums. That is why the number one operational rule in retirement income planning around IRMAA is to model MAGI before executing any discretionary income event, and to leave a comfortable buffer under the next threshold rather than approaching it precisely.

What counts toward MAGI

MAGI for IRMAA is adjusted gross income plus tax-exempt interest, primarily municipal bond interest. It includes wages, the taxable portion of Social Security benefits, pension income, traditional IRA and 401(k) distributions, Roth conversions, capital gains, qualified and ordinary dividends, interest income, and rental income. Qualified Roth IRA distributions do not count. Health Savings Account distributions used for qualified medical expenses do not count. Life insurance loan proceeds do not count. Return of principal on a non-qualified annuity does not count. These exclusions are the primary reason tax-diversified retirement income planning matters.

Appeals and life-changing events

Form SSA-44 lets a beneficiary request an IRMAA reduction based on a qualifying life-changing event: marriage, divorce or annulment, death of a spouse, work stoppage, work reduction, loss of income-producing property, loss of pension income, or an employer settlement payment. Retirement itself qualifies as work stoppage. What does not qualify is a one-time discretionary income event: the large Roth conversion, the sale of the vacation home, the concentrated stock diversification. Those cannot be appealed. That is why the planning conversation happens before the transaction, not after.

Planning levers advisors use

The core levers are staging, timing, and account location. Stage Roth conversions across multiple years to fill up to (but not through) the next IRMAA threshold. Use Qualified Charitable Distributions from an IRA to satisfy required minimum distributions without adding to MAGI. Harvest capital gains in low-income years between retirement and the start of Social Security. Time large capital events between spouses to smooth income. Coordinate with tax-loss harvesting. Pair conversions with charitable bunching. Each of these is arithmetic; the value the advisor adds is the sequence.

How to use this estimate

This calculator returns the current-year IRMAA tier, the combined Part B and Part D surcharge, and the dollar distance to the next cliff. Because MAGI drives the surcharge two years later, use it as a planning target: run projected MAGI for each of the next several years, identify where the client approaches a cliff, and adjust the current-year plan to keep MAGI in the intended tier. Real IRMAA determination happens at the Social Security Administration and can differ from this estimate.