Beginning my end of year process to convert Trad IRA funds to Roth within certain tax brackets.
I note that IRMAA for 2023 is calculated on 2021 AGI (technically MAGI)? I guess I just assumed that it was based on taxable income.
I have no problem with the fact that it is 2-year-old tax filings, but it seems that my strategy is leaving me pretty close to the current IRMAA limit.
The question is whether I should be concerned about the limits in 2025, which are not published yet.
Should I expect that the IRMAA limit will move each year in-line with SS increases (or decreases)?
I am already taking RMDs, but Neurospouse has another 7 years to go, which is why we are converting to reduce her future RMDs. And likely one day she will have both IRAs to consider at higher single rates. But if we convert 10% of her IRA per year, it will all work out as best as possible when that time comes.
I have also not forgotten that the current tax brackets will expire at the end of 2025. But we will have an election before that, and much may happen after that.
I would suggest that as long as you keep your income below the current year limits, you are unlikely to have to pay IRMAA in 2 years, when this year’s income is used. If you want to take the risk of going over the IRMAA cliff, you could use this year’s limits, plus your expectation of 2 years of inflation.
That said, I would caution about ‘surprise income’ at the end of the year like unexpectedly large mutual fund distributions, stocks that declare special dividends, etc. that may put you over the cliff.
In line with, since both adjustments are based on inflation.
IRMAA brackets are calculated separately from income tax brackets, and the TCJA didn’t change the IRMAA bracket calculations, so there won’t be any changes to IRMAA just because the TCJA expires or is extended.
But does expiration of TCJA change anything about the top line number that determines IRMAA “eligibility”? I can’t recall the details, if it’s just AGI then probably not, but if it’s AGI adjusted by various things, maybe …
Since the only add-back to calculate MAGI is the tax-exempt interest, a mere extension or expiration of TCJA should not change that. Now, if a different law is passed, that could change things. We will have to see what happens in the 2024 election to know what the chances of that are, because I doubt the current Congress could agree on any major tax law changes.
While tax-exempt interest is included in calculating MAGI for IRMAA purposes, far more significant contributors can be the age-based IRS’ Life Expectancy Table, Social Security’s COLA, and the stock market fluctuations.
For 2024, you already know from your 2022 federal taxes the impact of IRMAA on your income except if your spouse dies between now and the end of the current year. Filing status has the biggest impact on IRMAA.
While I agree that filing status is important, the IRMAA brackets for 2024 have not yet been released, so you don’t really know what IRMAA impacts will be yet, even though you have your 2022 income. They should be released soon - they are generally released in mid-October, and since the government did not get shut down, I would not expect that to be delayed.
You do make a good point about IRMAA impacts changing when your spouse dies. That’s another aspect that needs to be considered when doing retirement planning, since it’s likely that one of you could be filing single for a while.
No, the brackets will be reset for 2024 based on the 2023 brackets and inflation in 2023 but the income will be the income from the 2022 tax return. Here’s a couple of snips from the SS website Benefits Planner: Retirement | Medicare Premiums | SSA for the 2023 premiums.
This one shows that the income is based on your 2021 (or sometimes 2020) tax return
@aj485 Why do they write “with modified adjusted gross income” instead of “with 2022 modified adjusted gross income”?
A few days ago, I looked at a bunch of their documents and none of them clearly state which year to use. Not to mention that sometimes they might even use the previous year as I recall (maybe incorrectly).
The SS website link that I called out above (and here it is again: Benefits Planner: Retirement | Medicare Premiums | SSA ) does state which tax return to use, although it hasn’t been updated for 2024 yet - it still shows using the 2021 tax return (filed in 2022) for 2023 calculations: