The Basic Formula: Income Plus a Standard Amount

Your Medicare Part B premium is calculated using two pieces of information: your modified adjusted gross income (MAGI) from two years ago, and a base premium amount set by Medicare each year. If your income is below a certain threshold, you pay the standard base premium. If your income is above that threshold, you pay the base premium plus an additional amount called an income-related monthly adjustment amount (IRMAA).

The income thresholds and adjustment amounts change every year. For 2024, the base Part B premium is $164.90 per month for most people. But if your income exceeds $97,000 as a single filer or $194,000 as a married couple filing jointly, you will pay more. The higher your income above the threshold, the more you pay — up to a maximum of $560.50 per month in 2024.

Medicare uses your tax return from two years prior because that is the most recent complete income information available when they calculate your premium. This lag means your 2024 premium is based on your 2022 income, your 2025 premium on your 2023 income, and so on.

Key Takeaways

  • Your Part B premium depends on your modified adjusted gross income from two years before the year you are paying, not your current income.
  • If your income is below the annual threshold ($97,000 single, $194,000 married filing jointly in 2024), you pay only the base premium.
  • Income above the threshold triggers an additional monthly charge that increases in steps — the higher your income, the more you pay.
  • You can request a recalculation if your income dropped significantly due to retirement, job loss, or death of a spouse, using Form SSA-44.
  • The base premium and income thresholds change every year, so your premium may increase even if your income stays the same.

What Counts as Income for the MAGI Calculation

Modified adjusted gross income is not the same as your total income. It starts with your adjusted gross income (AGI) from your tax return, then adds back certain items that the IRS allows you to deduct. For most people, MAGI includes wages, self-employment income, interest, dividends, capital gains, and rental income.

It also includes one item many people do not expect: half of your Social Security benefits. Even if you do not include all your Social Security in your taxable income, Medicare counts half of what you received in the calculation. This is why someone with modest wages but substantial Social Security can end up paying an IRMAA surcharge.

Tax-exempt interest from municipal bonds is added back into MAGI for this calculation, even though it is not taxable. Distributions from traditional IRAs and 401(k)s count as income in the year you withdraw them. Roth conversions also count, because the converted amount is treated as income in that tax year.

Income Thresholds and the Surcharge Brackets

Medicare divides income into brackets, and each bracket has its own surcharge amount. In 2024, there are five income brackets above the threshold. A single person with MAGI between $97,000 and $123,000 pays one surcharge amount; someone between $123,000 and $153,000 pays a higher surcharge; and so on. The brackets are wider for married couples filing jointly.

The surcharge is not calculated as a percentage of your excess income — it is a flat monthly amount for each bracket. If your MAGI is $100,000 as a single filer, you are in the first surcharge bracket and pay a fixed additional amount per month. If your MAGI is $150,000, you jump to a higher bracket with a higher fixed surcharge, even though the income difference is only $50,000.

These thresholds and surcharge amounts are adjusted each year. They have generally increased over time, but the adjustment is tied to inflation and other factors, so the change is not always the same year to year. You can find the current year's thresholds and surcharge amounts on the Medicare.gov website or in your Social Security statement.

How Medicare Notifies You of Your Premium

You will receive a notice from Social Security or Medicare showing your calculated premium, usually a few months before the year begins. The notice will show your MAGI, the income threshold, and the surcharge amount if you are subject to one. If you disagree with the income figure used, you have the right to request a recalculation.

If you are enrolled in Original Medicare, your Part B premium is normally deducted from your Social Security check each month. If you are not yet receiving Social Security, or if you have opted out of automatic deduction, you will receive a bill from Medicare. If you are in a Medicare Advantage plan, your Part B premium is still calculated the same way, but you may pay it differently depending on your plan.

Requesting a Recalculation if Your Income Changed

If your income dropped significantly after the tax year used to calculate your premium, you can request that Medicare recalculate based on your current income. This is called a life-changing event appeal. may have access to events include retirement, job loss, death of a spouse, divorce, or a substantial reduction in income or earnings.

To request a recalculation, you file Form SSA-44 with Social Security. You will need to provide documentation of the event — a termination letter from your employer, a death certificate, divorce papers, or a recent tax return showing lower income. Social Security will review your request and issue a new premium notice if they approve it.

The recalculation uses your current year income or the year of the event, depending on which is more recent and relevant. If approved, your new premium takes effect the month after Social Security processes your request. This can take several weeks, so submit the form as soon as possible after the may have access to event occurs.

When Your Premium Increases Without Income Changes

Even if your income stays exactly the same, your Part B premium can increase from year to year. This happens because the base premium itself increases, and because the income thresholds are adjusted annually. If you are in a surcharge bracket, your surcharge amount may also increase.

The base premium increase is announced by Medicare in the fall, before the new year begins. The increase is tied to the cost of providing Part B services and is not directly tied to inflation. In some years the increase has been substantial; in others it has been modest or nonexistent.

If you are approaching an income threshold and expect to cross it in the coming year, you may want to consider timing large income events — such as selling an investment or taking a large IRA withdrawal — to avoid triggering a surcharge. A tax professional or financial planner can help you understand the impact of timing on your Medicare premium.

Frequently Asked Questions

Why does Medicare use income from two years ago instead of my current income?

Medicare uses prior-year income because tax returns are the most reliable and complete income information available. Your 2022 tax return is finalized and verified by the time Medicare calculates your 2024 premium. Using current-year income would require estimates and would be less accurate. If your income drops significantly, you can request a recalculation using Form SSA-44.

Does my spouse's income count if we file taxes separately?

If you are married and file taxes separately, only your own income is used to calculate your Part B premium. However, if you file jointly, your combined MAGI is used, and the higher joint income thresholds explore. The filing status on your tax return determines which income is counted.

What if I have a large one-time income event, like selling a house?

A large capital gain from selling a home will increase your MAGI for that tax year and may trigger or increase your Part B surcharge for the following two years. If the sale was your primary residence, you may be able to exclude part of the gain from income, which would reduce the impact on your Medicare premium. Consult a tax professional before a major sale to understand the Medicare implications.

Can I appeal my premium if I think the income figure is wrong?

Yes. If you believe Medicare used incorrect income information, you can request a recalculation. You will need to provide documentation showing what your actual income was in the year used for the calculation. Contact Social Security or Medicare to request a review, and be prepared to submit copies of tax returns or other income records.

Does my Part B premium change if I move to a different state?

No. Part B premiums are the same nationwide and do not vary by state. Your premium is based only on your income and age, not on where you live. Some states may have different rules for other Medicare costs, such as cost-sharing, but the Part B premium itself is uniform across the country.