Higher-income Medicare beneficiaries (individuals who earn more than $85,000) pay higher Part B and prescription drug benefit premiums than lower-income Medicare beneficiaries. The extra amount the beneficiary owes increases as the beneficiary's income increases. The Social Security Administration uses income reported two years ago to determine a beneficiary's premiums. So the income reported on a beneficiary's 2015 tax return is used to determine whether the beneficiary must pay a higher monthly premium in 2017.
A lot can happen in two years. If your income decreases significantly due to certain circumstances, you can request that the Social Security Administration recalculate your benefits. For example, if you earned $90,000 in 2015 but your income dropped to $50,000 in 2016, you can request an income review and your premium surcharges for 2017 could be eliminated. Income is calculated by taking a beneficiary's adjusted gross income and adding back in some normally excluded income, such as tax-exempt interest, U.S. savings bond interest used to pay tuition, and certain income from foreign sources.
You can request a review of your income if any of the following circumstances occurred:
You married, divorced, or became widowed
You or your spouse stopped working or reduced your work hours
You or your spouse lost income-producing property because of a disaster or other event beyond your control
You or your spouse experienced a scheduled cessation, termination, or reorganization of an employer's pension plan
You or your spouse received a settlement from an employer or former employer because of the employer's closure, bankruptcy, or reorganization
If your income changes due to any of the above reasons, you can submit documentation verifying the change in income -- including tax documents, letter from employer, or death certificate -- to the Social Security Administration. If the change is approved, it will be retroactive to January of the year you made the request.
The Social Security Administration has a helpful guide on this topic as well.