Insurance Health Insurance What You Need To Know About Medicare Surcharges By Tim Parker Tim Parker Facebook Twitter Tim Parker specializes in investing topics and is the president of IT services company "The Web Group." He has degrees from Wright State University and the University of Cincinnati. learn about our editorial policies Updated on October 26, 2022 Reviewed by Erika Rasure Reviewed by Erika Rasure Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest. learn about our financial review board Fact checked by David Rubin In This Article View All In This Article Medicare Surcharges How Medicare Surcharges Are Determined How Much You Pay How To Avoid Paying Medicare Surcharges Frequently Asked Questions (FAQs) Photo: Tom Werner / Getty Images Some people might call a Medicare surcharge a good problem to have, but it's an unfortunate expenditure for households that are forced to pay extra premiums on top of their usual Medicare costs. The requirement can sometimes be avoided. Key Takeaways You pay Medicare surcharges, as well as premiums for Part B and Part D coverage, in 2023 if your household had more than $194,000 in joint income, or $97,000 if filing individually, in 2021.Medicare surcharges are also called "Income-Related Monthly Adjustment Amounts" (IRMAA).The Social Security Administration determines your Medicare surcharges based on your modified adjusted gross income (MAGI) from two years ago.You can enroll in a Medicare Advantage plan (Part C) or a Medigap policy, or you might do some tax planning to reduce your MAGI to avoid paying some Medicare surcharges. Medicare Surcharges You paid into Medicare during your working years. About 15% of your paycheck never reached your pocket because the federal government took it for Social Security and Medicare taxes. You're probably a little more accepting of those decades of deductions when you reach retirement because you'll receive full health insurance at next to no cost, especially compared to what you may have paid while you were working. Original Medicare alone likely isn't enough to cover all of your health care needs. Many retirees carry a Medicare Supplement plan to fill the holes in their coverage. This drives monthly health care costs higher. But standard Medicare costs just $164.90 for most people in 2023, down $21.60 from $170.10 in 2022. The federal government pays 75% of the cost for your Part B premiums, thanks in part to your decades of deductions from your paychecks. You'll pay Medicare surcharges on top of your normal Original Medicare premiums for Part B and Part D coverage in 2023 if the household earnings on your 2021 tax return were more than $194,000 combined, or $97,000 if you're single. These surcharges are also called "Income-Related Monthly Adjustment Amounts" (IRMAA). IRMAA charges have a two-year look back. How Medicare Surcharges Are Determined According to the Social Security Administration (SSA), your modified adjusted gross income (MAGI) from two years ago is what counts. This means that benefits for the current period are based on calculations from the income you earned two years earlier. Most people's MAGIs and adjusted gross incomes (AGIs) will be the same, but your MAGI may be different if you're paying student loan interest, alimony payments, moving expenses, or some other types of payments. The SSA will look at your 2021 tax return to determine whether you owe surcharges in 2023. It's done this way because the levels are normally set the year before, while the Social Security Administration only has access to returns from the prior tax year. How Much You Pay Paying extra is something you might be able to avoid, but there's good news hidden in these extra charges. Here's how the charges break down for modified adjusted gross incomes reported two years prior: For 2022 You'll pay an extra $68 monthly for Part B and $12.40 extra for Part D if you're married and made $182,000 to $228,000 jointly or $91,000 to $114,000 as an individual.You'll pay an extra $170.10 monthly for Part B and $32.10 extra for Part D if you're married and made $228,000 to $284,000 jointly or $114,000 to $142,000 as an individual.You'll pay an extra $272.20 monthly for Part B and $51.70 extra for Part D if you're married and made $284,000 to $340,000 jointly or $142,000 to $170,000 as an individual.You'll pay an extra $374.20 monthly for Part B and $71.30 extra for Part D if you're married and made more than $340,000 to $750,000 jointly or more than $170,000 to $500,000 as an individual.You'll pay an extra $408.20 monthly for Part B and $77.90 extra for Part D if you're married and made more than $750,000 jointly or more than $500,000 as an individual. For 2023 You'll pay an extra $65.90 monthly for Part B and $12.20 extra for Part D if you're married and made $194,000 to $246,000 jointly or $97,000 to $123,000 as an individual.You'll pay an extra $164.80 monthly for Part B and $31.50 extra for Part D if you're married and made $246,000 to $306,000 jointly or $123,000 to $153,000 as an individual.You'll pay an extra $263.70 monthly for Part B and $50.70 extra for Part D if you're married and made $306,000 to $366,000 jointly or $153,000 to $183,000 as an individual.You'll pay an extra $362.60 monthly for Part B and $70.00 extra for Part D if you're married and made more than $366,000 to $750,000 jointly or more than $183,000 to $500,000 as an individual.You'll pay an extra $395.60 monthly for Part B and $76.40 extra for Part D if you're married and made more than $750,000 jointly or more than $500,000 as an individual. Each of the tiers is an all-or-nothing charge. You only have to be $1 into the next tier to pay the higher amount. There is no prorating within the tiers. Note You can expect these figures and income thresholds to change somewhat annually due to inflation adjustments. And keep in mind that Medicare is always a hot political topic. Medicare law often changes as well. How To Avoid Paying Medicare Surcharges You might be able to avoid paying some Medicare surcharges by enrolling in a Medicare Advantage plan (Part C) or a Medigap policy. Most people are better off having one of these policies to close the Medicare coverage gaps. Work with a professional to create a cost-effective plan if you only enroll in original Medicare. These surcharges are based on your tax return, so it's possible to do some tax planning to avoid paying Medicare surcharges altogether, or at least to keep from moving up a tier. You might look at harvesting investment losses to counteract the income if your income will be higher this year due to a one-time gain that disqualifies benefits by putting you over the income limit. You may pay this year but not next year because surcharges are determined yearly. Work with a tax professional for help on finding ways to bring your MAGI lower to avoid paying more surcharges. Frequently Asked Questions (FAQs) What causes a medicare surcharge? If your household income goes over a certain amount, your Medicare premiums will increase. How much of a surcharge also depends on your tax filing status—whether you filed an individual or joint tax return. The premium is based on tax return income information from two years prior.For example, if you filed individually and made more than $97,000 and less than $123,000 in 2021, you'd pay an extra $65.90 monthly for Medicare Part B in 2023. However, you'd pay an extra $164.80 in 2023 if you made more than $123,000 and less than $153,000 in 2021. How do I avoid paying Medicare surcharges? You might be able to avoid paying Medicare surcharges by signing up for a Medicare Advantage plan (Part C). One of these plans might help you close the gap in Medicare coverage, which is why it's referred to as a Medigap policy. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Social Security Administration. "Program Operations Manual System (POMS): HI 01101.010 Modified Adjusted Gross Income (MAGI)." Centers for Medicare & Medicaid Services. "2023 Medicare Parts A & B Premiums and Deductibles 2023 Medicare Part D Income-Related Monthly Adjustment Amounts." Medicare.gov. "Medicare & You 2023," Page 23. Internal Revenue Service. "Topic No. 751 Social Security and Medicare Withholding Rates." Social Security Administration. "Premiums: Rules for Higher-Income Beneficiaries." Social Security Administration. "Program Operations Manual System (POMS): HI 01101.010 Modified Adjusted Gross Income (MAGI)." Centers for Medicare & Medicaid Services. "2022 Medicare Parts A & B Premiums and Deductibles/2022 Medicare Part D Income-Related Monthly Adjustment Amounts." Centers for Medicare & Medicaid Services. "2023 Medicare Parts A & B Premiums and Deductibles 2023 Medicare Part D Income-related Monthly Adjustment Amounts."