Medicare Part B premiums are automatically deducted from Social Security, Railroad Retirement Board, and Office of Personnel Management payments. The standard Medicare Part B premium is adjusted based on a taxpayer’s Modified Adjusted Gross Income (MAGI). MAGI for Medicare purposes is the taxpayer’s AGI plus any tax-exempt interest. Medicare uses a taxpayer’s MAGI from two years prior to determine any premium adjustment. For example, the MAGI from the 2019 tax return will determine 2021 Medicare premiums.
The standard Part B premium amount in 2021 is $148.50. Based on a taxpayer’s Modified Adjusted Gross Income, they may be required to pay an Income Related Monthly Adjustment Amount (IRMAA) on their Part B premium. MAGI thresholds and the associated Part B IRMAA is shown in the table below for each tax filing status:
At open enrollment, Medicare participants have the option to enroll in Part D prescription drug plans. Part D premiums are in addition to Medicare Part B supplement premiums and they vary per plan. Taxpayers with a higher MAGI will be required to pay a Medicare Part D surcharge in addition to their plan’s premium. Similarly to Part B premiums, the surcharge will be deducted from Social Security benefits if the participant is receiving them: otherwise, the individual will receive a bill for the monthly surcharge amount. The Part D IRMAA for 2021 is shown in the table below:
Alyssa Yocom is an Associate Wealth Manager with Schultz Financial Group Inc.
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Understanding Required Minimum Distributions (RMD) is imperative for effective retirement planning. RMD rules can be complicated and difficult to understand, so we’ve outlined common questions and explanations to help you.