How to Reduce or Eliminate IRMAA Surcharges on Medicare Premiums: 2025 Guide

What Are IRMAA Surcharges and Why Should You Care?

IRMAA, which stands for Income-Related Monthly Adjustment Amounts, significantly impacts high-income earners on Medicare but rarely receives adequate coverage in retirement planning discussions. If you're approaching Medicare age or already enrolled, understanding these surcharges could save you thousands of dollars annually.

This guide explains what IRMAA is, how it's calculated, and provides actionable strategies to legally reduce or eliminate these surcharges in 2025 and beyond. If you're a high-income earner who doesn't enjoy paying hundreds of extra dollars monthly for Medicare, this information is essential for your retirement planning. If you're a high-income earner who DOES enjoy paying hundreds of extra dollars monthly for Medicare, maybe consider getting your healthcare Power of Attorney documents in order. 

Understanding IRMAA's Impact on Your Medicare Costs

IRMAA applies to Medicare Parts B and D premiums based on your modified adjusted gross income (MAGI) from two years prior. For 2025 premiums, your 2023 tax return is used to determine surcharges.

Medicare offers two primary enrollment paths:

1. Original Medicare: Typically includes Medicare Part A (usually premium-free), Part B (standard medical coverage), optional Medicare supplement (Medigap), and Part D (prescription drug coverage)
2. Medicare Advantage: Combines various coverages into a single plan

IRMAA surcharges apply to both Part B and Part D premiums regardless of which enrollment path you choose.

2025 Medicare Part B IRMAA Surcharges

2025 Medicare Part D IRMAA Surcharges

The Real Financial Impact of IRMAA

What does this mean in practical terms? If you're a married couple with MAGI above $750,000, you could pay:

• Part B: Additional $443.90/month per person ($628.90 - $185.00) = $10,653.60/year for a couple
• Part D: Additional $85.80/month per person = $2,059.20/year for a couple

That's over $12,700 in additional Medicare premiums annually just because of your income level.

It's important to note that IRMAA surcharges are "cliff penalties" – if you're just $1 over a threshold, you pay the entire higher amount. This makes strategic income planning crucial for those near these thresholds.

What's New for 2025

The 2025 Medicare premium amounts and IRMAA income thresholds have been adjusted from 2024 levels:

• The standard Part B premium has increased from $174.70 (2024) to $185.00 (2025), a 5.9% increase
• Income thresholds have been raised to account for inflation:
  • Individual lowest threshold: $97,000 (2024) → $106,000 (2025)
  • Joint lowest threshold: $194,000 (2024) → $212,000 (2025)
• Maximum IRMAA surcharges have also increased:
  • Maximum Part B surcharge: $419.30 (2024) → $443.90 (2025) per person monthly
  • Maximum Part D surcharge: $81.00 (2024) → $85.80 (2025) per person monthly

These increases make strategic income planning even more important for those approaching or in retirement, especially if your income is near one of the IRMAA thresholds.

Understanding MAGI for IRMAA Calculations

Modified Adjusted Gross Income (MAGI) for IRMAA purposes includes:

• Adjusted Gross Income (AGI) from line 11 of your Form 1040
• Plus any tax-exempt interest income

Your AGI includes all income except "above the line" adjustments such as:

• HSA contributions
• Deductible IRA contributions
• Student loan interest
• Self-employed business deductions

Standard and itemized deductions do not reduce your MAGI as they occur "below the line."

5 Effective Strategies to Reduce IRMAA Surcharges

1. Strategic Income Diversification

Combine multiple retirement income sources to carefully manage your taxable income:

• Roth IRA distributions: Tax-free withdrawals don't count toward MAGI
• Principal withdrawals from taxable accounts: Only the capital gains portion impacts MAGI
• Tax-loss harvesting: Offset capital gains with losses in taxable accounts
• Strategic withdrawal sequencing: Rather than the standard "taxable first, then traditional, then Roth" approach, consider blending withdrawals annually to stay under IRMAA thresholds

Example: Instead of taking $120,000 from your traditional IRA (all taxable), consider taking $80,000 from traditional IRA and $40,000 from Roth IRA to potentially stay in a lower IRMAA bracket.

2. Roth Conversion Planning

Strategically converting traditional IRA funds to Roth IRAs before Medicare enrollment can significantly reduce future RMDs and IRMAA exposure:

• Pay taxes now at potentially lower rates
• Reduce future Required Minimum Distributions that could push you into higher IRMAA brackets
• Create tax diversification for flexibility in retirement income planning

For more details on Roth conversion strategies, see our comprehensive guide: Is a Roth Conversion Right for You?

3. Strategic Asset Location

Place investments in the most tax-efficient account types:

• Tax-efficient investments (index funds, ETFs) in taxable accounts
• Income-producing investments (bonds, REITs) in tax-advantaged accounts
• High-growth investments with long holding periods in Roth accounts

This strategy reduces annual taxable income while maintaining your desired asset allocation.

4. Qualified Charitable Distributions (QCDs)

If you're 70½ or older:

• Donate directly from your IRA to qualified charities (up to $108,000 per person in 2025, adjusted annually for inflation)
• QCDs count toward your Required Minimum Distribution
• The distribution isn't included in your AGI, potentially lowering your IRMAA bracket
• Provides charitable impact while reducing your tax burden

5. Social Security Timing and Medicare Enrollment Coordination

• Delaying Social Security can reduce IRMAA in early retirement years
• Coordinate large income events (like Roth conversions) with Medicare enrollment timing (if you're retired and don't have active health coverage, this won't be an option)
• Consider healthcare coverage options before Medicare to facilitate strategic income planning

When to Request an IRMAA Reconsideration

Medicare allows you to request a reconsideration of your IRMAA determination if you've experienced a "life-changing event" that reduced your income, including:

1. Marriage, divorce, or spousal death
2. Work stoppage or reduction
3. Loss of income-producing property
4. Loss of pension income
5. Employer settlement payment

File Form SSA-44 with documentation to potentially reduce or eliminate your IRMAA surcharge midyear rather than waiting for your next tax return to be processed.

Work With a Professional for Optimal Results

IRMAA planning is complex and requires coordination between:

• Tax planning
• Investment management
• Social Security claiming strategy
• Medicare enrollment timing
• Required Minimum Distribution planning

If you're approaching Medicare age or already subject to IRMAA surcharges, work with a financial advisor and tax professional who understand these complex interactions to develop a comprehensive strategy.

At 37 Wealth, we specialize in helping clients navigate these retirement planning challenges. Contact us for a personalized IRMAA reduction strategy.

This article is meant for educational purposes only. It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional  or Tax Professional regarding your personal situation prior to making any financial-related decisions. 

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.

No strategy assures success or protects against loss.

Sources:

1. Social Security Administration - Medicare Premiums: Rules For Higher-Income Beneficiaries
2. Medicare.gov - Part B Costs
3. Medicare.gov - Part D Costs
4. IRS - Modified Adjusted Gross Income