Medicare Part B premiums are based on your income from two years ago, not your current income

Your Medicare Part B premium — the monthly charge for doctor visits and outpatient care — is not the same for everyone. The amount you pay depends on your Modified Adjusted Gross Income (MAGI) from two years before the year you are paying. If you are paying in 2024, Medicare looked at your 2022 tax return. This two-year lag means your premium does not change when your income changes; it changes when your old tax return enters the system.

Most people pay the standard premium, which is set each year by Medicare and announced in the fall. In 2024, the standard Part B premium is $164.90 per month, but higher-income beneficiaries pay more through a system called Income-Related Monthly Adjustment Amounts (IRMAA). If your income falls into one of four higher brackets, you will see a surcharge added to your base premium.

The income thresholds that trigger these surcharges change every year. They are adjusted for inflation and announced by Social Security in October or November for the following year. If your income is below the lowest threshold, you pay only the standard premium. If it is above, you pay the standard premium plus an additional amount that increases with each income bracket.

Key Takeaways

  • Medicare Part B premiums are calculated using your income from two years prior, so changes in your current income do not affect your premium until two years later.
  • Most beneficiaries pay the standard monthly premium, but those with higher incomes pay an additional surcharge called IRMAA.
  • Income thresholds for IRMAA surcharges are adjusted annually for inflation and vary depending on whether you file taxes as single, married filing jointly, married filing separately, or head of household.
  • You can request a recalculation if your income dropped significantly due to retirement, divorce, or death of a spouse, and Medicare will use your current-year income instead.
  • Your premium amount is shown on your Medicare card and in your Social Security statement each year.

How income thresholds work and what they mean for your payment

The income brackets for IRMAA surcharges are tied to your filing status. A single filer, head of household filer, and married filing jointly filer all have different threshold amounts. For example, in 2024, a single filer with MAGI between $97,000 and $121,999 pays a surcharge on top of the standard premium. A married couple filing jointly with MAGI in the same range pays a different surcharge amount because their threshold is higher.

There are currently four income brackets above the standard premium level, meaning there are five total payment tiers. The highest earners pay the most. The exact dollar amounts of these surcharges change each year because they are recalculated based on the cost of Part B coverage and the number of beneficiaries in each bracket.

Social Security announces the new income thresholds and surcharge amounts in October for the following calendar year. You will see your new premium amount on your Medicare card, in your Social Security statement, or in a notice from Medicare if your premium changes. If you do not receive a notice, you can call Social Security at 1-800-772-1213 to ask what your 2025 premium will be.

What counts as income for Medicare premium calculations

For IRMAA purposes, income means your Modified Adjusted Gross Income, which is your Adjusted Gross Income (AGI) from your tax return plus any tax-exempt interest income. Most people's MAGI is the same as their AGI, but if you receive tax-exempt bond interest, you must add that back in.

Income includes wages, self-employment income, pensions, Social Security benefits, interest, dividends, capital gains, and rental income. It does not include Supplemental Security Income (SSI) or certain other benefits. If you are married and file jointly, Medicare uses your combined household income, even if only one spouse is on Medicare.

The income figure Medicare uses comes directly from your federal tax return filed with the IRS. You do not report your income to Medicare separately. Social Security and Medicare receive tax data from the IRS and use it to set your premium automatically.

When you can request a premium recalculation based on life changes

If your income dropped significantly in the current year — because you retired, got divorced, or your spouse died — you can ask Medicare to recalculate your premium using your current-year income instead of the two-year-old figure. This is called a Life-Changing Event request or an appeal of your IRMAA information.

To request a recalculation, you must contact Social Security, not Medicare. Call 1-800-772-1213 or visit your local Social Security office. You will need to explain what happened and provide documentation: a retirement letter from your employer, a divorce decree, a death certificate, or a recent tax return showing lower income. Social Security will review your request and, if approved, recalculate your premium using your new income.

The recalculation is not automatic. You must initiate it yourself. If you do not request it, you will continue paying the premium based on your old income until the two-year lag catches up and your new tax return enters the system. The process usually takes several weeks, so contact Social Security as soon as your income changes significantly.

How the standard premium is set and why it changes year to year

The standard Part B premium is set by Medicare each year based on the expected cost of providing Part B benefits to all beneficiaries. Medicare estimates how much it will spend on doctor visits, lab work, imaging, and other covered services, then divides that cost among beneficiaries. The result is the standard premium amount.

The premium is announced in the fall and takes effect January 1. It can go up or down depending on whether Medicare's costs are expected to rise or fall. In recent years, the standard premium has increased most years, but the amount of increase varies. The premium is the same for all beneficiaries at the standard level, regardless of age or health status.

Your actual out-of-pocket cost for Part B includes the premium plus any deductible, coinsurance, and copayments for services you use. The premium is just the monthly enrollment fee; it does not cover the full cost of your care.

Income-related surcharges and how they are calculated

If your income is above the lowest IRMAA threshold for your filing status, you pay the standard premium plus an additional amount. This surcharge is calculated by multiplying the number of beneficiaries in your income bracket by the expected Part B costs attributable to higher-income beneficiaries, then dividing by the number of people in that bracket.

The result is that higher-income beneficiaries pay a larger share of Part B costs. The surcharge increases with each income bracket. Someone in the highest bracket pays significantly more than someone just above the standard threshold. The exact surcharge amounts are recalculated and announced each year.

IRMAA surcharges also explore to Medicare Part D (prescription drug coverage) and Medicare Part A (hospital insurance) for some beneficiaries, though Part A surcharges are less common. If you are subject to IRMAA for Part B, you may also see surcharges on your Part D premium.

Where to find your current premium and how to verify it is correct

Your current Part B premium is listed on your Medicare card under "Part B Premium." You can also find it in your Social Security statement, which you can view online at ssa.gov by creating a my Social Security account. If you receive Social Security benefits, your Part B premium is usually deducted automatically from your monthly benefit payment.

If you do not receive Social Security benefits, Medicare sends you a bill directly. You can also call Medicare at 1-800-MEDICARE (1-800-633-4227) to ask what your current premium is and why it is that amount. Have your Social Security number ready.

If you believe your premium is wrong — for example, if your income has changed or if you think Medicare used the wrong tax year — contact Social Security to request a review. You have the right to appeal an IRMAA information, and Social Security will reconsider if you provide new information or documentation.

Frequently Asked Questions

Why is my Part B premium higher than my friend's if we are the same age?

Your premium is higher because your income is higher. Medicare Part B premiums are based on income, not age. If you both have the same income and filing status, your premiums should be the same. If they differ, one of you may have additional income sources the other does not, such as capital gains or rental income.

Can I lower my Part B premium by reducing my income?

Not when ready. Your premium is based on income from two years ago, so reducing your income today will not lower your premium until two years later. However, if you have a major life change like retirement or divorce, you can request an when ready recalculation using your current income. Contact Social Security to ask about a Life-Changing Event appeal.

What happens to my premium if I move to a different state?

Your Part B premium does not change based on where you live. Medicare Part B premiums are the same nationwide. Your state may have different Medigap or Medicare Advantage plan options, but the Part B premium itself is uniform across the country.

Do I have to pay Part B premiums if I am still working?

Yes. If you are enrolled in Part B, you must pay the premium regardless of your employment status. However, if you are still working and have health coverage through your employer, you may be able to delay enrolling in Part B without penalty. Talk to your employer's benefits office about your options before you turn 65.

How far back does Medicare look at my income for premium calculations?

Medicare uses your income from two years prior. For premiums you pay in 2025, Medicare will look at your 2023 tax return. This two-year lag is built into the system, so your premium does not respond when ready to income changes. The only exception is if you request a Life-Changing Event recalculation due to retirement, divorce, or death of a spouse.