IRMAA Limits to use for 2023 Tax Return for 2025 Medicare Rates

Submitted by Curtis Meusel on Sun, 2023-12-10 21:53

Hello,

I am preparing my parents preliminary 2023 tax return and wanted to know what others are using as Modified Adjusted Gross Income for a married couple in 2023 so that in 2025 they will stay in the lower tier for medicare payments.

I was going to use $200,000 but did not know if that is a good conservative number or not with inflation.

Just do not want to go over the MAGI limit and my parents get hit with IRMAA charges in 2025.

Still have time to do the ROTH conversion but wanted to find out what others are doing as far as MAGI Limits.

Thanks In Advance

Curtis



Submitted by William Tuttle on Sun, 2023-12-10 22:51

  • If you go to this link
  • https://thefinancebuff.com/medicare-irmaa-income-brackets.html#htoc-2025-irmaa-brackets
  • You will see that based on September/2023 and October/2023 CPIs released 11/14/23. With a 0% projected CPI for the remaining 10 months. 1st IRMAA tier be $210K. That is a conservative estimate if you do not expect any deflation over the next 10 months.
  • If you wait until sometime* after 12/14/23 @8:30am when the November CPI is scheduled for release you will have 3/12 data points.
  • *The Finance Buff is pretty prompt in updating this information. I have never known him to be wrong with IRMAA or any other projections of IRS inflation indexed limits (e.g. retirement, HSA, etc …).
  • I have relied on his IRMAA projections for the last five years. However, I still leave a margin for any oversights I might have in my own IRMAA MAGI projections.


Submitted by David Mertz on Mon, 2023-12-11 00:34

A way to get two more data points (January 15 and February 15) to use in estimating the 2025 IRMAA thresholds would be to receive a distribution after December 15, then wait close to 60 days to make the conversion contribution.  If at that time you are less comfortable with converting the entire amount distributed you can roll some over to effectively reduce your 2023 AGI after year end.  A possible downside is that such a rollover will be subject to the one-rollover-per-12-months limitation if the distribution comes from a traditional IRA rather than from a qualified retirement plan and you don’t have a qualified retirement plan that can receive the rollover.



Submitted by William Tuttle on Mon, 2023-12-11 21:12

Always thinking!



Submitted by David Mertz on Thu, 2024-01-11 14:33

  • I’ve recreated thefinancebuff’s calculations.  Using the November or December CPI for the remaining months used in the calculation probably produces a slightly conservative projection in that it does not take into account that the November and December numbers are seasonally slightly low.  I’ve modified the calculations to factor the seasonal effect out of the most recently available number (the December 2023 CPI was released today) and then project that value forward, factoring the seasonal effect back in for each of those monthly projections.  As expected, the resulting estimated IRMAA thresholds are about 0.5% higher.
  • I ended up using my own suggestion about taking a distribution in mid-December so that in late January I can complete the either a Roth conversion of the entire amount or convert some and roll over some.  I’m glad I did because in my income estimate for 2023 I had failed to account for my savings account earning more interest than last year.  I will be rolling some over some of that distribution instead converting because I would otherwise be pushing too close to the projected 2025 IRMAA threshold that I’m targeting.


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