What Tax Year Is the 2024 Medicare Part B Premium Based On?

Medicare Part B premiums help cover the cost of outpatient medical care, including doctor visits, preventive services, tests, and more. Most people pay the standard Part B premium amount, but higher earners pay extra based on their income.

In 2024, the standard Part B premium will be $164.90 per month. However, the income thresholds that determine if you'll pay more are based on your tax return from two years prior. So what tax year is used to calculate if you'll owe additional premiums for Medicare Part B in 2024?

Below we’ll explain how the 2024 Part B premium relates to your tax return and income from the 2022 tax year. This look back approach allows Medicare to apply income-based surcharges accurately and consistently.

How Are Medicare Part B Premium Surcharges Calculated?

Medicare uses modified adjusted gross income (MAGI) from your federal tax return to determine if you'll pay an extra premium amount for Part B coverage. This is called the income-related monthly adjustment amount (IRMAA).

Surcharges apply on a sliding scale if your income is above $97,000 as an individual or $194,000 as a married couple (in 2023). The higher above the thresholds, the greater the added costs.

IRMAA affects both your Medicare Part B and Medicare Part D premiums. So higher earners pay more for both medical services and prescription drug coverage.

Why Is a Lookback Approach Used?

Instead of basing IRMAA on your income during the current year, Medicare uses your reported income from two years prior to calculate surcharges.

For example, the 2024 Part B premiums are based on 2022 tax return data. There are a few reasons for this lookback approach:

• Your latest tax return is the most recent complete year of income data. Current year estimates wouldn't be as accurate.

• Knowing premium costs well in advance allows better budgeting and planning.

• Lookback provides continuity in income thresholds year-over-year.

• Processing time is needed to incorporate tax data into Medicare systems.

So while a slight lag exists, the lookback method allows accurate Part B premium determinations based on complete income tax filings.

What Were the IRMAA Income Thresholds for the 2022 Tax Year?

The IRMAA income thresholds from the 2022 tax year (to determine 2024 Medicare premiums) were:

• Individuals with income up to $97,000 or married couples up to $194,000 paid the standard premium amount.

• Individuals $97,001-$123,000 or couples $194,001-$246,000 paid an additional $68 per month.

• Individuals $123,001-$153,000 or couples $246,001-$306,000 paid an extra $170 per month.

• Individuals $153,001-$183,000 or couples $306,001-$366,000 paid an additional $326 per month.

• Individuals above $183,001 or couples above $366,001 paid an extra $482 per month.

So if your 2022 MAGI falls into one of the higher brackets, you'll owe the corresponding IRMAA when 2024 Medicare premiums are determined.

How Will the IRMAA Thresholds Change in 2023 and 2024?

The income thresholds used to calculate IRMAA are updated each year based on inflation and other factors.

In 2023, the individual brackets increased between $7,000-$10,000 and the married brackets increased between $14,000-$20,000. Additional slight increases are expected again for 2024.

Medicare will communicate updated IRMAA brackets through their website and handbooks. Review the new thresholds each fall to estimate if surcharges will apply when you enroll in Medicare down the road.

What If My Income Has Gone Down Since I Filed My Taxes?

If your income decreases significantly, you can submit documentation to Medicare such as tax returns or pay stubs to request reassessment of your premium. If approved, your Medicare costs can be lowered mid-year.

This appeals process also applies if you filed jointly but have since divorced or your spouse has died. Reporting qualifying life changes may help reduce your IRMAA.

However, Medicare won't increase your premium mid-year if your income rises. Higher premiums can only be phased in as part of the annual determination process.

Key Takeaways on Medicare Premium Tax Look Back

The main points to understand about how tax years relate to Medicare premium costs:

• Part B/D premium surcharges are based on tax data from 2 years back.

• For 2024, your 2022 tax return determines if you'll pay extra.

• Threshold brackets increase annually - stay up to date on the latest amounts.

• Report income reductions mid-year via an appeal to potentially lower costs.

• Plan ahead knowing your Medicare premium costs are tied to past tax returns.

While the look back approach has drawbacks, it does enable Medicare to apply IRMAA consistently based on verified income tax data. Contact a Medicare counselor if you have questions about Part B or D premium determination.

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FAQs

What Tax Year Is the 2024 Medicare Part B Premium Based On?

The 2024 Medicare Part B premium is based on your tax return from 2022. The premium is determined by your income from two years prior.

What is Medicare IRMAA?

Medicare IRMAA, or Income-Related Monthly Adjustment Amount, is an additional amount that some Medicare beneficiaries have to pay for their Part B and Part D premiums. It is based on the beneficiary's income level.

How are the IRMAA brackets for 2024 determined?

The IRMAA brackets for 2024 are determined by the Centers for Medicare and Medicaid Services (CMS). They are based on the consumer price index and are adjusted annually.

How much does IRMAA cost in 2024?

The cost of IRMAA in 2024 depends on your income level. The higher your income, the higher the IRMAA surcharges for both Part B and Part D premiums.

How does income relate to Medicare beneficiaries?

A: Income is related to Medicare beneficiaries because it determines whether they will have to pay the income-related monthly adjustment amount (IRMAA) for their Part B and Part D premiums.

What is the percentage of Medicare premiums that IRMAA surcharges?

The percentage of Medicare premiums that IRMAA surcharges depends on the beneficiary's income level. The higher the income, the higher percentage of surcharges they need to pay.

What are the monthly Medicare premiums?

The monthly Medicare premiums include the base beneficiary premium for Part B, and if applicable, the income-related monthly adjustment amount (IRMAA) surcharges for both Part B and Part D premiums.

Is IRMAA based on the income of the previous year?

No, IRMAA is based on the income from two years prior. For example, the IRMAA in 2024 is based on the income reported on your tax return from 2022.

How does IRMAA affect Part B or Part D premiums?

IRMAA affects Part B or Part D premiums by adding an additional amount to the standard premium. The surcharge is based on the beneficiary's income level.

Who has to pay the IRMAA surcharges?

Medicare beneficiaries whose income exceeds certain thresholds have to pay the IRMAA surcharges for their Part B and Part D premiums. Not everyone is subject to these surcharges.