This Medicare surcharge has a two-year lag time. Whether you pay an IRMAA in 2025 depends on the income shown on your 2023 tax returns, so good planning will be key to avoid it in future years. The IRRMA is based on your Modified Adjusted Gross Income from two years ago.
The converted amount is treated as ordinary income and is fully taxable in the year of conversion. This is the immediate, direct cost. A Roth conversion increases your MAGI in the year you do it, which will affect your Medicare Part B and Part D premiums two years later. Pushing your income into a new bracket will result in a higher premium surcharge for both of you, which can cost thousands of dollars annually. Living in a high-tax state means you'll pay a higher state income tax bill on the conversion amount as well.
Once money is in the Roth, future qualified withdrawals do not increase your AGI/MAGI.
It seems like a key planning point will be the timing of the amounts converted to limit the MAGI impact for that year. Here is a great article regarding planning.
Here is a good resource for the IRMAA brackets and charges.
Hope this helps!
Cindy
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