Lower Your 2023 Medicare Tax; 2022 Tax Planning Tip
When it comes to lowering your 2023 Medicare tax, a little bit of attention can result in a significant savings. Starting January 1, some Americans will pay $6,726 for Medicare Part B coverage. Others will pay only $1,979. Reducing the $4,747 difference is possible. Here’s what higher income Medicare beneficiaries need to know.
We explain what you can expect to pay in 2023. And ways to dispute and possibly lower the amount.
2022 Tax Planning Tip: At the end of this post we share a tip worth reading before you file your 2022 income taxes.
The Medicare Tax; What You Need To Know
Individuals who are enrolled in Medicare Part B and/or Medicare Part D have to pay a monthly charge for these benefits. Typically, an amount is deducted from the monthly Social Security payment.
For 2023, the minimum amount is $164.90 monthly ($1,978.80 annually) for Medicare Part B. For Part D (drug plan coverage), the minimum charge is $0. Some call these amounts a payment; others call it a Medicare tax.
Some people pay much more than the minimum. The difference is due to additional surcharges that are imposed when taxable earnings exceed $97,000 a year. This is called the income-related monthly adjusted amount (IRMAA).
The threshold for IRMAA surcharges was lower in 2022. For 2022 it started at $91,000. The amount has grown for 2023, due to inflation. It will now keep growing each year going forward.
The maximum amount for 2023 can be $560.50 monthly ($6,726 annually) for Medicare Part B. For Part D, the maximum is $76.40 monthly (916.80 yearly).
How To Lower Your 2023 Medicare Tax
The income-related monthly adjusted amount (IRMAA) is determined by income from your income tax returns two years prior. Below are the 2023 IRMAA levels.
You should have already received a notice from the Social Security Administration indicating what they plan to deduct or charge you starting January 2023. Many people don’t read or understand exactly what the paperwork says.
Your 2023 Medicare premiums will be based on amounts reported on your 2021 income tax return. The IRMAA surcharge will be added to your premium if your 2021 income was over $97,000 (or $194,000 if you’re married).
Most people can’t change the past. Below, we do share a way you can.
But, read our tip for avoiding paying more in future years.
Do You Have Medigap Plan F? Want to Pay Less?
Millions of seniors have Medigap Plan F. Insurers have been raising rates year after year. It is worth looking at costs for Plan G. You might be able to save hundreds of dollars each year. Learn more. Talk to a local Medigap agent who can provide information and cost comparisons.
Click to find a local Medigap agent who can tell you rates in your Zip Code.
What Are The 2023 IRMAA Levels?
The income used to determine IRMAA is a form of Modified Adjusted Gross Income (MAGI). It is specific to Medicare.
The Modified Adjusted Gross Income is different from your Adjusted Gross Income (AGI). That’s because some people have additional income sources that have to be added to their AGI in order to determine their IRMAA-specific MAGI.
| Part B – 2023 IRMAA | ||||
|---|---|---|---|---|
| Individual | Joint | Monthly Premium | ||
| $97,000 or less | $194,000 or less | $64.90 (no IRMAA) | ||
| $97,000 – $123,000 | $194,000 – $246,000 | $230.80 | ||
| $123,000 – $153,000 | $246,000 – $306,000 | $329.70 | ||
| $153,000 – $183,000 | $306,000 – $366,000 | $428.60 | ||
| $183,000 – $500,000 | $366,000 – $750,000 | $527.50 | ||
| Greater than $500,000 | Greater than $750,000 | $560.50 | ||
| Part D (Drug Plan) – 2023 IRMAA | ||||
|---|---|---|---|---|
| Individual | Joint | Monthly Premium | ||
| $97,000 or less | $194,000 or less | No IRMAA (+ Part D Premium) | ||
| $97,000 – $123,000 | $194000 – $246,000 | $12.40 | ||
| $123,000 – $153,000 | $246,000 – $306,000 | $31.50 | ||
You Can Appeal The 2023 IRMAA Amount
You can appeal the IRMAA determination for 2023. It pays to look back at your 2021 taxes.
If you believe that your calculation is erroneous, file for a redetermination. Use Form SSA-44 from the Social Security Administration.
In addition, if you have had a life-changing event such as a loss of income or divorce, then you can file for a redetermination. Use the same form.
2022 Tax Tip: Read This Before Filing
Your 2022 tax returns will be used to calculate your Medicare Part B and Part D IRMAA amounts for the 2024 Medicare tax.
While it’s too early to predict future levels used by the IRS, the income numbers below are a good starting point.
In 2022, the 4th IRMAA tier was set at $142,000 to $170,000. For 2023, that tier was $153,000 to $183,000. The 2022-to-2023 increase was about 8 percent (the inflation rate amount).
If one assumes the annual inflation rate for 2023 is say 5%, the 2024 level could increase to say $161,000 to $192,000.
If you or your tax preparer see amounts near or close to the anticipated thresholds, it may really pay to make sure that you don’t overlook any and all deductions you are entitled to. They could make the difference.
The just passed SECURE Act will also have implications going forward that are worth discussing with your tax preparer.
For example, the Act allows you to delay when taking withdraws from qualified funds such as a 401(k), IRA, or 403(b). This additional income will increase your Modified Adjusted Gross Income. It may subject you to higher Medicare Part B and Medicare Part D premiums. Delaying the withdrawal could reduce your future Medicate tax.
Likewise, realized capital losses can reduce your MAGI. The potential reduction of your Medicare Part B and Part D premiums could soften the blow of a loss.
As always, the Association does not give any tax or legal advice. Always speak to your tax advisor. But we hope this information is helpful and can benefit you in some manner.
Additional Medicare Information You May Find Of Value
Please click on any of the links (below). Read other recent news stories or reports containing information we believe you may find of value.
Medicare General Enrollment Period; 2023 Changes Benefit Seniors
2023 Medicare Changes – New Benefits – New Plans
The Difference Between Medicare Broker Medicare Agent Matters
Best Medigap 2023 Prices Reported By Association
Is the Medicare Grocery Benefit a Scam?
New To Medicare Law Benefits Seniors Turning 65
Senate Report Slams Medicare Advantage Marketing Practices
About the Author
Jesse Slome
Medicare Insurance Expert
Director, American Association for Medicare Supplement Insurance
Jesse Slome is a leading Medicare insurance expert and the founder and director of the American Association for Medicare Supplement Insurance (AAMSI). Since 1998 AAMSI has served to educate consumers and support insurance professionals who offer Medicare insurance plans.
