Here’s a brief explanation of how premiums are determined.
If your yearly income is below $182,000 for couples and $91,000 for individuals, your monthly Medicare premium is $170/mo in 2022. But, if your income is above $340,000 (joint) or $170,000 (individual) the Medicare premium jumps to $544/mo. – a pretty hefty increase. There are steps in between, but, frankly, the ranges are in a fairly narrow range. See the chart below for the details:
Medicare premiums in 2022 are determined this year based on income from your 2020 tax return. Just like income in 2022 will affect your Medicare premiums in 2024. The income used to determine your premium is a form of Modified Adjusted Gross Income (MAGI) called IRMAA. For most, it means that tax-exempt interest earnings are added to MAGI to determine IRMAA for Medicare premium purposes. In addition, Medicare beneficiaries can be in for a surprise two years from now if you are in a “high income” position this year for other reasons. If, for example, you sell a piece of real estate or sell something for a large capital gain, your Medicare premium could go up two years from now, while only temporary.
Part D (prescription coverage) IRMAA surcharges are added to the base premium in the same manner, but, are not nearly as harsh. See the chart below:
For most, the complexity of this issue is not something you need to concern yourself with. But, for others, we warned you! Medicare premiums are just one more thing to plan around when you are making significant financial decisions.