Your Medicare Part B premium amount (and the Part D premium) is based on the Modified Adjusted Gross Income (MAGI) on your tax return from two years ago — the most recent federal tax return the IRS provides to Social Security. The Income Related Monthly Adjustment Amount (IRMAA) is an extra amount added to the base Medicare Part B premium for higher income levels.
Here is the Medicare IRMAA premium table. (Military retirees won’t have Medicare Part D coverage, but if you should get Part D, this is the cost.)
Your MAGI is your total Adjusted Gross Income (2019 IRS Form 1040, line 8b) plus your tax-exempt interest income (line 2a). This is your income before your standard or itemized deductions.
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Some non-paycheck actions that cause an increase in your MAGI include:
- IRA and retirement account withdrawals
- Roth IRA conversions
- Withdrawals from insurance annuity policies
- Withdrawals (but not loans) from cash value of life insurance
- The gain from the sale of a home or securities
- Interest, dividends, and capital gains from held savings and investments
- Business income
- Rental real estate
- Farm income
Please note that some of the above can be managed.
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Besides the shock of Part B premiums to Medicare newcomers, the jump in your Part B premium after a one-time financial transaction can also cause distress.
You can appeal your increased Medicare premium if you experienced a life-changing event that caused your income to decrease. Or, you can prove your income information that determined your premium is incorrect or outdated.
You can appeal to Social Security for any of the following life-changing events:
- the death of a spouse
- marriage, divorce, or annulment
- retirement, reduced work income, or loss of job for one or both spouses
- loss of income-producing property due to event beyond your control
- loss or decrease in a pension
Bring your documentation to validate your situation.
However, a one-time jump in MAGI from the result of a home sale, a large portfolio distribution, or a Roth IRA conversion, for example, does not qualify as a life-changing event. These situations will increase your Medicare premium for at least a year in the future.