When I first learned about Medicare to help my dad make his decision, I was shocked at many of the rules that impact him.
One of the most shocking rules was around what he would pay for Medicare because of his income. If you have higher income, the law requires you pay more for your Medicare Part B and Medicare prescription drug premiums. This extra money you pay is called income-related monthly adjustment amount (IRMAA).
These additional fees can quickly add up and it’s important to understand how the rules work so you aren’t overpaying for Medicare.
When people are not aware how these rules work, they’re either one, very much surprised by the cost of Medicare. Or two, they’re oftentimes paying more for Medicare because they don’t know the rules and how to get those additional fees waived.
There are three parts to this rule you should be aware of to avoid surprises or overpaying for Medicare.
1) Income levels that require you to pay more.
It’s important to be aware of what income level requires you to pay more for your Medicare and how that number is created.
Medicare uses your most recent federal tax return from the IRS to determine your modified adjusted gross income (MAGI). Your MAGI is your total adjusted gross income and tax-exempt interest income.
You will pay more for Medicare Part B and prescription drug coverage if you file your taxes as:
- “Married, filing jointly” and your MAGI is greater than $170,000, you’ll pay higher.
- Or another taxes using a different status, and your MAGI is greater than $85,000.
2) What affects your MAGI (modified adjusted gross income)?
MAGI is not the same as your income but is based on your income.
The many numbers that go into calculating your MAGI include:
- Income from an employer.
- Income from investments (this includes rental property).
- Money taken out of retirement accounts.
Another thing to note on MAGI, Medicare uses the most recent number that the IRS has, but sometimes this number is two years old. IRMAA rules will likely apply to you if your income was at or over these levels over the past two years.
3) How to get extra income adjustments waived.
It’s important to understand that Medicare can waive these fees, but they won’t do it proactively.
If your income goes down and you are below the IRMAA income levels you may be able to get the additional fees waived.
We help our clients to get these additional fees waived for many situations. The most common situation people get these additional fees waived is if you or your spouse stop working. This change saves people thousands of dollars each year.
To know if you are going to hit IRMAA levels, check your tax returns to get an idea of what your income was.
If you want our help to get IRMAA charges waived, call us at 785-537-6225.
Medicare is confusing but I hope this helps clarify one of the lesser understood parts of Medicare
