What can be worse than expecting to finally get a Social Security raise, only to find out that your net check actually went down due to your income two years ago? Let me introduce you to the Income-Related Monthly Adjustment Amount, or IRMAA for short.
Here’s what you’ll pay according to Medicare.gov:
| If your yearly income in 2018 (for what you pay in 2020) was | You pay each month (in 2020) | ||
| File individual tax return | File joint tax return | File married & separate tax return | |
| $87,000 or less | $174,000 or less | $87,000 or less | $144.60 |
| above $87,000 up to $109,000 |
above $174,000 up to $218,000 |
Not applicable | $202.40 |
| above $109,000 up to $136,000 |
above $218,000 up to $272,000 |
Not applicable | $289.20 |
| above $136,000 up to $163,000 |
above $272,000 up to $326,000 |
Not applicable | $376.00 |
| above $163,000 and less than $500,000 |
above $326,000 and less than $750,000 |
above $87,000 and less than $413,000 |
$462.70 |
| $500,000 or above | $750,000 and above | $413,000 and above | $491.60 |
Individual and separate filers under Modified Adjusted Gross Income (MAGI) of $87,000 are safe, and so are joint filers under $174,000. MAGI is Adjusted Gross Income (AGI) plus tax-exempt interest.
Life-Changing Events that Qualify for Appeal
What if your MAGI was $180,000 in 2018, and you retired in January 2020? The Social Security Administration, who oversees Medicare, won’t find out about your lower income until 2021 when you file your 2020 taxes and won’t automatically lower your premiums until 2022. However, you can file an appeal letting them know about your income drop, which should reduce your premiums. Here are the acceptable reasons or life events that qualify for appeal as listed on Form SSA-44:
- Reduction or stoppage of work by you or your spouse
- The death of a spouse
- Marriage
- Divorce or annulment
- Involuntary loss of income-producing property due to a natural disaster, disease, fraud, or other circumstances
- Loss of pension
- Receipt of settlement payment from a current or former employer due to the employer’s closure or bankruptcy
You will need to provide evidence of the life-changing event, but don’t wait and get stuck with higher premiums for the next two years! A CERTIFIED FINANCIAL PLANNER™ professional can help you understand what your MAGI is and help you develop a yearly tax strategy to help you keep more of your money.
Originally published April 2018
