Those currently on Medicare understand they pay a standard part B premium amount of $121.80 a month (higher depending on income) and another $30 to $60 a month (or more depending on the plan) for part D drug coverage.   However, taxpayers in the upper 5% income brackets pay a higher income related monthly adjustment amount (IRMAA) depending on their modified adjusted gross income (MAGI).

Single filers with MAGI income greater than $133K and joint filers with MAGI income greater than $267K , will be paying higher premiums starting in 2018 thanks to the Medicare Access and CHIP Reauthorization Act of 2015 (also known as the “Doc Fix” law.) Importantly, the IRRMA amounts for 2018 are determined from 2016 tax returns.   The tiered threshold IRMMA amounts have been changed to the following:

MAGI Tier Single 2016 tax year Married 2016 Tax year
#1 <-$85,000 $<170,000
#2 >=$85,001 to <=$107,000 >=$170,001 to <=$214,000
#3 >=$107,01 to <=$133,500 >=$214,001 to <=$267,000
#4 >=$133,501 to <=$160,000 >=$267,001 to <=$320,000
#5 >$160,000 >$320,000

The additional amounts paid by those in tier #2 thru #5 currently range from $60 to $330 a month for both Medicare B and D depending on the tier (#1 tier pays no additional amount). The law reduced the upper limits for the upper three MAGI tiers, which will make it easier for people to be in tiers #4 and #5, resulting in many more individuals paying higher premiums.   Tax filers potentially impacted will want to consider such strategies as making more withdrawals from their Roth IRAs and health saving accounts which doesn’t count as MAGI.

By Barry Jamieson, MA

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