What is IRMAA?

It is the Income Related Medicare Adjustment Amount. Put simply, the more income on your tax return, the more your Medicare Part B and Part D prescription drug premiums will cost.

It can be triggered by a large capital gain or an extra IRA withdrawal. With a little planning and the use of Qualified Charitable Distributions (QCD) you can possibly limit the impact. You can also appeal your situation if you have an unusual or non-recurring event.

In 2018, you could pay up to $294.60 per month in additional premiums. See the table below for details. Income limits are double for couples filing jointly.

Things that need to be taken into consideration include:

1. Required Minimum Distributions (RMDs) from your tax deferred accounts

2. The sliding scale of taxability of Social Security benefits

3. Limits for tax-free treatment of dividends and long-term capital gains

4. Sale of property

One tool that can be used is a Qualified Charitable Distribution (QCD). This IRS rule allows you to gift a portion of your RMD directly to a charity and reduce your Adjusted Gross Income (AGI). As a result, you also don’t have to claim the charitable contribution as a deduction on your itemized deductions. By lowering your Adjusted Gross Income you may avoid paying additional Medicare premiums under IRMMA rules.

Please consult with your tax advisor so that they can prepare pro-forma tax estimates to determine the benefits, and any potential impacts and conflicts.