IRMAA – Medicare Income-Related Monthly Adjustment

Category: Tax Planning for Seniors | FinSeniors, Worthune.com

Most people know that Medicare Part B (medical insurance) costs money. What surprises many retirees is how much it can cost — and that the amount isn't the same for everyone. If your income is above certain thresholds, you pay more. This surcharge is called the Income-Related Monthly Adjustment Amount, or IRMAA. For some retirees, IRMAA adds thousands of dollars to their annual Medicare costs. Understanding how it works — and how to plan around it — is an important part of retirement income management.

Medicare sets a base premium for Part B and Part D each year. For 2026, the standard Part B premium is approximately $185 per month. Most beneficiaries pay this base amount.

However, if your Modified Adjusted Gross Income (MAGI) from two years prior exceeds certain thresholds, you pay an additional surcharge — IRMAA — on top of the base premium. The key phrase: two years prior. Your 2026 Medicare premiums are based on your 2024 tax return. Your 2024 MAGI is what Medicare looks at.

💡 IRMAA is per person. A married couple where both are on Medicare each pay the surcharge. At the highest tier, a couple could pay over $1,400 per month in combined Part B premiums alone — more than $16,800 per year before Part D surcharges.

For IRMAA purposes, MAGI is your Adjusted Gross Income plus tax-exempt interest income. This means:

• Traditional IRA and 401(k) withdrawals — fully counted

• Taxable Social Security benefits — counted

• Pension and annuity income — counted

• Capital gains — counted

• Roth IRA withdrawals — NOT counted (tax-free and excluded from AGI)

• Tax-exempt municipal bond interest — IS counted (added back to AGI for IRMAA)

• QCDs (Qualified Charitable Distributions) — NOT counted (excluded from AGI)

Because IRMAA is based on income from two years ago, spikes in income today affect Medicare premiums in two years. This is why Roth conversions, large capital gains events, or other income spikes need to be planned with IRMAA in mind — not just for the current year's tax bill, but for future Medicare premiums.

Conversely, a year of unusually high income (say, from selling a business or a large Roth conversion) will show up in Medicare premiums two years later, even if your income has since returned to normal. This can be appealed — more on that below.

IRMAA thresholds work like a cliff rather than a gradual slope. Being $1 above a threshold puts you in the next tier entirely — you don't just pay a tiny bit more, you jump to the full surcharge for that tier.

For example, a single filer with 2024 MAGI of $106,000 pays the base Part B premium. A single filer with $106,001 of MAGI pays an extra $74 per month — nearly $900 per year more — for that one dollar of extra income. Managing income to stay just below an IRMAA threshold can yield meaningfully better outcomes.

Qualified Charitable Distributions

QCDs from your IRA are excluded from AGI entirely — they don't count toward IRMAA MAGI. For retirees who are charitably inclined and subject to RMDs, QCDs are one of the most effective ways to satisfy the RMD while keeping MAGI below IRMAA thresholds.

Roth Conversions in Low-Income Years

Once converted, Roth withdrawals don't count toward IRMAA MAGI. Strategic Roth conversions in years before RMDs begin can reduce future MAGI and eliminate long-term IRMAA exposure — even though the conversion itself temporarily increases income in the conversion year.

Careful Timing of Capital Gains

If possible, spread large capital gains events across multiple years rather than concentrating them in one year. Selling a rental property or a large stock holding in a single year can push you across multiple IRMAA tiers. Installment sales or staged selling can smooth the impact.

Tax-Loss Harvesting

Realizing capital losses in taxable accounts can offset gains that would otherwise push you into a higher IRMAA tier. Review your portfolio for harvesting opportunities, particularly in years when you anticipate other income spikes.

If you experienced a significant reduction in income due to a qualifying 'life-changing event,' you can request that Medicare use more recent income data rather than the two-year-old return. Qualifying events include:

• Marriage, divorce, or death of a spouse

• Retirement or reduction in work hours

• Loss of income-producing property due to disaster

• Loss or significant reduction of a pension

• Receipt of an employer settlement payment

To appeal, file Form SSA-44 (Medicare Income-Related Monthly Adjustment Amount — Life-Changing Event) with the Social Security Administration. Include documentation of the life-changing event and your current or expected income. If approved, your premiums will be recalculated based on your current income rather than the two-year lookback.

💡 Retirement itself is a qualifying life-changing event. If you retired in 2024 or 2025 and your income dropped significantly, you may be able to use your reduced retirement income rather than your last working year's higher income for IRMAA purposes.

Each spouse's IRMAA surcharge is calculated independently based on their individual MAGI from their joint (or separate) return. Married couples filing jointly share the combined income thresholds but each pay their own IRMAA surcharge. This means a couple where both are on Medicare can face double the surcharge if their combined income exceeds the threshold.

IRMAA is one of the most significant — and least understood — costs in retirement. For a couple with above-average income, it can add $5,000–$15,000 or more per year to their Medicare costs compared to the base premium. Building IRMAA awareness into your retirement income planning — especially around Roth conversions, capital gains timing, RMD management, and charitable giving — can meaningfully reduce your lifetime healthcare costs.

💡 IRMAA thresholds and premium amounts are updated annually. The 2026 figures shown here are estimates and will be confirmed by Medicare. Please consult a qualified tax professional or Medicare specialist for current figures and personalized planning.