Protecting the Consumer's Future

- Written by Paul Davis

Say hello to IRMAA.  Now try to say goodbye.

Most people on Medicare now pay $148.50/month for Part B.  But, there is an additional component that can boost that monthly cost to as high as $582/month per person.  It is called the Income Related Monthly Adjustment Amount, or IRMAA.

The Federal Income Tax System is based on the higher earners being able to afford more income tax.  The same applies to the Medicare Parts B & D premiums.  Higher earners can afford to pay a greater share.  (We may not want to pay more, but we can afford to do so.)

This is currently based on your Modified Adjusted Gross Income (MAGI) in the tax year 2019.  There is always a 2 year look back.  Every December 1 this is recalculated and applied on the January 1st.  Modified Adjusted Gross Income is NOT a line item on your tax return.  For many it is identical to Adjusted Gross Income, but for some it is higher.  Consult your tax preparer.

If you file singly and your MAGI was under $88,000 in 2019 you will be at the $148.50 base amount.  If you file jointly, and your MAGI was under $176,000 in 2019 you will be at the $148.50 base amount.

Some items which can affect your AGI are:

  • Student Loan Interest
  • One-half of self-employment tax
  • Qualified tuition expenses
  • Tuition and fees deduction
  • Passive loss or passive income
  • IRA contributions
  • Non-taxable social security payments
  • The exclusion for income from U.S. savings bonds
  • Foreign earned income exclusion
  • Foreign housing exclusion or deduction
  • The exclusion under 137 for adoption expenses
  • Rental Losses
  • Any overall loss from a publicly traded partnership

What can you do about IRMAA?

If you have had a change in circumstances, you can appeal using Form SSA-44.  You must be able to attest that you have had a Life changing event:

We most often use this form when someone quits working and enrolls in Medicare.  But, it may apply to anyone that has had one of these changes.  This will affect your IRMAA immediately, as opposed to when the change is reflected in your tax return.  If you have had no change in circumstances or income, you are going to have the privilege of paying IRMAA.  The federal government has clearly decided that the top 5-10% of income earners should pay more.

If you are over 65 and still working you, may be considering transitioning onto Medicare instead of your group health plan.  IRMAA plays a big part in our analysis as to whether that makes sense.  So, part of this is a math problem.  We also factor in the quality of coverage and maximum out of pocket exposure.

You may be able to affect your IRMAA by altering your investment portfolio.  This is an issue beyond the scope of this article and the competence of this author.

For more information consult your tax preparer, look up the SSA-44 form or contact me.  Paul Davis, Paul Davis Insurance Services (818) 888- 0880 and  California License # 0669770, OM47932.  All we do is help people with Medicare Health Plan Options.

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