Ask the Expert: How is the Medicare premium surcharge calculated?

November 25, 2023

How does Medicare calculate our gross income to determine whether we’ll pay a premium surcharge? We’re married, filing jointly, with income consisting of pensions, interest, capital gains and dividends and Social Security benefits. Is the untaxed part of our Social Security benefit included in the gross income calculation? I know the 2025 surcharge will be based on our 2023 modified adjusted gross income (MAGI). We want to do Roth conversions this year, but don’t want the resulting additional income to make us subject to surcharges in 2025. In 2024, married couples with income under $206,000 won’t owe a surcharge. Can I assume that’s a safe guideline for 2025?

You probably can. Income that triggers the surcharge is adjusted annually for inflation. The 2025 income subject to surcharge is very unlikely to be lower than the 2024 amount unless inflation runs at under 0%.

For readers who don’t know, if you’re a Medicare enrollee with gross income exceeding a specific amount, you pay a premium surcharge called IRMAA (Income-Related-Monthly-Adjustment-Amount). The surcharge rises across five income brackets. The standard 2023 Medicare Part B premium is $164.90 a month. Married couples with 2021 MAGI between $194,000 and $246,000 — the lowest 2023 IRMAA bracket — paid an extra $65.90 for each spouse’s Part B coverage. Couples in the highest 2021 income bracket paid a 2023 surcharge of $395.60, bringing each spouse’s monthly premium to $560.50.

For IRMAA calculations, MAGI is your adjusted gross income (which doesn’t include the untaxed portion of Social Security) plus tax-exempt interest income, interest from U.S. savings bonds used to pay for higher education, and income from sources in Guam, American Samoa, the Northern Mariana Islands or Puerto Rico not otherwise included in your adjusted gross income.