Many clients mistakenly assume that their Medicare premiums will be set in stone once they become eligible for coverage. In reality, clients' income matters when it comes to determining their Medicare premium costs.
Because premium payments for Medicare Part B are based upon the Medicare recipient's income, most retirees assume they're in the clear once they stop working. Premium levels, however, are calculated using a two-year lookback period — and clients are often surprised at the amounts included in the calculation.
The income thresholds for the 2024 Medicare income-related monthly adjustment amount have recently been released, and clients should be advised that they do have options that can help them avoid the post-retirement Medicare premium sticker shock.
IRMAA: The Basics
The IRMAA is a surcharge on Medicare premiums for higher-income taxpayers. The amount is adjusted annually for inflation for tax years beginning in 2020 and later.
Clients in higher-income tiers have higher Medicare premium costs. However, it's important to remember that the system bases those IRMAA surcharges on clients' income from two years ago. That means clients who retired in 2024 will find that their premium liability is based on their income levels while fully employed in 2022.
As an initial matter, the Social Security Administration will send a notice called an initial determination if the SSA determines that the client owes an IRMAA. The notice will also contain information about how to request a new determination if the client has experienced certain life-changing events.
The surcharge amounts are added to clients' regular Medicare Part B and Part D premium bills. It's their responsibility to make sure that the surcharges are paid even if their employer covers their Part D costs. The amounts can be paid online through the client's Medicare account or by signing up for automatic deductions with Medicare Easy Pay.
Of course, clients can also mail their payment using the return envelope that comes with the premium bill.
2024 IRMAA Amounts
In 2024, for single taxpayers with income greater than $103,000 and less than or equal to $129,000 (between $206,000 and $258,000 for joint returns), the IRMAA is $69.90 for Part B and $12.90 for Part D coverage.
For single taxpayers with income greater than $129,000 and less than or equal to $161,000 (between $258,000 and $322,000 for joint returns) the IRMAA is $174.70 for Part B and $33.30 for Part D.
