One High-Income Year Could Raise Your Medicare Premiums Later

A particularly profitable year in retirement can come with a delayed expense that catches some Medicare beneficiaries by surprise. Selling investments, realizing a large capital gain, taking substantial retirement-account withdrawals, or receiving other taxable income can push household income high enough to trigger Medicare premium surcharges later. The extra charge is formally called the Income-Related Monthly Adjustment Amount, or IRMAA, and it can increase both Medicare Part B and Part D costs. What makes IRMAA confusing is that the bill generally does not arrive during the same year that produced the higher income. Understanding that delay can help retirees plan major financial moves without being blindsided by higher healthcare premiums afterward.

Medicare Looks Back at Earlier Income

Social Security generally determines whether someone owes IRMAA using income information from a federal tax return provided by the IRS, typically from two years earlier. In practical terms, that means the income used to determine Medicare premium surcharges may reflect financial decisions made well before the higher premiums begin. This lag can be confusing for a retiree whose income has since dropped substantially, particularly after leaving a job or selling an investment only once. A person may look at today’s monthly income and wonder why Medicare considers them a high-income beneficiary. The answer often lies in an older tax return rather than their current bank deposits or Social Security check.

How the Two-Year IRMAA Lookback Can Play Out

The easiest way to understand IRMAA is to put the income year and Medicare year side by side. If a retiree realizes a large capital gain, completes a sizable Roth conversion, or takes a substantial taxable retirement-account withdrawal in 2026, that income would generally appear on the federal tax return filed in 2027. Medicare normally uses tax information from two years earlier when determining whether a beneficiary owes an income-related surcharge, meaning that 2026 income could potentially affect Medicare premiums in 2028. By the time those higher premiums arrive, the retiree’s income may have returned to normal, which is one reason IRMAA notices can be so surprising. Thinking about the Medicare impact before completing a large transaction can therefore be useful even when the surcharge would not appear for another couple of years.

Even a Small Amount Over a Threshold Can Matter

IRMAA is particularly important to watch when your modified adjusted gross income is close to one of Medicare’s annual income thresholds. The surcharge is determined by income brackets, which means moving into the next bracket can increase the monthly adjustment rather than gradually phasing it in one dollar at a time. For 2026, for example, an individual with MAGI of $109,000 or less pays the standard $202.90 Part B premium, while someone whose MAGI falls in the next bracket pays $284.10 per month. That does not mean retirees should make poor investment or tax decisions simply to stay below an IRMAA threshold, but it does mean the potential Medicare cost belongs in the calculation. Someone whose income is close to a bracket boundary may want a tax professional to model the consequences before realizing additional gains, making a large taxable withdrawal, or completing a Roth conversion.

The 2026 Income Threshold Starts at $109,000

For 2026, the standard Medicare Part B premium is $202.90 per month, but IRMAA begins above $109,000 in modified adjusted gross income for individual filers and above $218,000 for married couples filing jointly. Someone in the first IRMAA bracket pays an additional $81.20 per month for Part B, bringing the total monthly Part B premium to $284.10. At the highest 2026 bracket, Part B reaches $689.90 per month for beneficiaries with income of at least $500,000 individually or $750,000 jointly. CMS estimates that income-related adjustments affect roughly 8% of people enrolled in Medicare Part B. Crossing one of these thresholds can therefore make an otherwise successful financial year noticeably more expensive later.

Part D Can Carry a Surcharge Too

Part B isn’t the only place where Medicare premium surcharges appear because high-income beneficiaries can also owe an additional amount for Medicare Part D prescription drug coverage. In 2026, Part D IRMAA ranges from $14.50 to $91 per month depending on income, and that amount comes on top of the premium charged by the beneficiary’s chosen drug plan. Medicare explains that beneficiaries who owe Part D IRMAA generally pay that additional amount through Social Security deductions or directly to Medicare rather than simply adding it to the amount paid to the drug plan. For a married couple in which both spouses have Medicare, IRMAA can become particularly significant because each beneficiary can potentially face individual Part B and Part D adjustments.

One Unusual Financial Move Can Push Income Higher

Retirees do not necessarily need a permanently high income to encounter IRMAA, which is why tax planning can matter before making large transactions. A sizable traditional IRA withdrawal, Roth conversion, investment sale producing a large capital gain, or other taxable-income event could potentially raise modified adjusted gross income enough to cross an IRMAA threshold. For Medicare IRMAA purposes, Social Security generally defines modified adjusted gross income as adjusted gross income plus tax-exempt interest, so municipal-bond interest should not automatically be assumed invisible to the calculation. Your adjusted gross income can be found on Line 11 of Form 1040, according to the IRS. Before taking a particularly large withdrawal or realizing a major gain, retirees may want a tax professional to model both the immediate tax consequences and possible future Medicare premium surcharges.

A Lower Income May Give You Grounds to Request a Reduction

One of the biggest misconceptions about IRMAA is that beneficiaries are necessarily stuck with the higher amount whenever an older tax return shows substantial income. Social Security allows beneficiaries to request a reduction when certain life-changing events have caused household income to fall, including marriage, divorce, death of a spouse, loss of income, and some employer settlement payments. The request can be made using Form SSA-44, Medicare Income-Related Monthly Adjustment Amount–Life-Changing Event, along with evidence supporting the event and reduction in income. A retiree who stopped working, for example, should not simply assume a premium based on an earlier high-earning year cannot be reconsidered. However, having less income now does not automatically guarantee a reduction, so beneficiaries should review Social Security’s qualifying events and documentation requirements carefully.

Not Every Large Movement of Money Affects IRMAA the Same Way

A large transaction does not automatically increase Medicare premiums simply because a substantial amount of money moved between accounts. What matters is how the transaction affects the modified adjusted gross income Medicare uses for IRMAA purposes. A taxable traditional IRA distribution or Roth conversion can increase income, while simply moving money between accounts in a properly completed tax-free rollover generally presents a different tax situation. Likewise, selling an appreciated investment may create taxable capital gain, but withdrawing cash that was already sitting in a bank account does not by itself create taxable income simply because the withdrawal is large. Before assuming a major financial transaction will—or will not—affect IRMAA, determine how much of the transaction will actually appear in the income calculation used for Medicare.

A One-Time Income Spike Does Not Automatically Qualify for a Reduction

Having substantially less income today than you did two years ago does not necessarily mean Social Security will lower your IRMAA. The agency allows beneficiaries to request a new determination after certain recognized life-changing events that reduce household income, including events such as marriage, divorce, the death of a spouse, work stoppage or reduction, loss of income-producing property in qualifying circumstances, loss of certain pension income, and some employer settlement payments. A voluntary investment sale or unusually large taxable withdrawal that simply produced a one-time income spike may not fit those categories solely because the income did not repeat the following year. Beneficiaries should therefore read the IRMAA notice carefully and determine whether their circumstances meet Social Security’s requirements before assuming lower current income is enough to have the surcharge reduced.

FAQs About Medicare IRMAA

What is IRMAA?

IRMAA stands for Income-Related Monthly Adjustment Amount. It is an additional amount some higher-income Medicare beneficiaries pay for Part B and Part D coverage. For 2026, IRMAA begins when modified adjusted gross income exceeds $109,000 for an individual filer or $218,000 for a married couple filing jointly.

Does IRMAA affect both Part B and Part D?

Yes. Higher-income beneficiaries can owe an additional amount for both Medicare Part B and Part D. The Part D IRMAA is paid in addition to the premium charged by the beneficiary’s prescription-drug plan.

Can a Roth conversion trigger IRMAA?

A taxable Roth conversion can increase adjusted gross income and potentially push a Medicare beneficiary into an IRMAA bracket. Whether that happens depends on the amount converted and the beneficiary’s other income for the year. This is one reason retirees contemplating large conversions may want to model the Medicare consequences along with the immediate tax consequences.

Does tax-exempt municipal-bond interest count toward IRMAA?

It can. Social Security generally calculates MAGI for IRMAA using adjusted gross income plus tax-exempt interest, so investors should not assume federally tax-exempt interest is automatically excluded from Medicare’s income calculation.

Can I appeal an IRMAA surcharge if my income drops?

Possibly, but a lower income alone does not automatically guarantee a reduction. Social Security permits beneficiaries to request a lower IRMAA following certain qualifying life-changing events and provides Form SSA-44 for that process.

Is IRMAA permanent once I trigger it?

Not necessarily. Medicare’s income-related adjustments are determined using applicable income information for each Medicare year, so an unusually high-income year does not automatically mean you’ll pay the same surcharge forever. However, another high-income tax year could produce another future IRMAA determination.

IRMAA Should Be Part of Retirement Tax Planning

The possibility of Medicare premium surcharges does not mean retirees should automatically avoid selling appreciated assets, completing Roth conversions, or withdrawing money they need. Instead, IRMAA is another cost to include when comparing the consequences of making a large financial move this year versus spreading it across multiple tax years when that is feasible. For example, someone planning a substantial Roth conversion might ask a tax professional to estimate how different conversion amounts affect federal taxes, Medicare income thresholds, and other income-sensitive costs before committing to the transaction. Thresholds and premiums are determined annually, so retirees should use figures for the appropriate Medicare year rather than assuming today’s numbers will remain unchanged. Good planning considers the entire financial picture instead of making an important retirement decision solely to avoid a Medicare surcharge.

Before a Big Year-End Financial Move:

• Estimate your projected MAGI.
• Add tax-exempt interest.
• Compare the result with current IRMAA brackets.
• Model the taxable portion of IRA withdrawals/Roth conversions.
• Estimate capital gains before selling appreciated investments.
• Calculate potential Part B and Part D IRMAA.
• Remember the potential Medicare impact may arrive two years later.
• Don’t make a poor tax/investment decision solely to avoid IRMAA.

Today’s Income Decisions Can Affect Tomorrow’s Medicare Bill

The most important thing to remember about Medicare premium surcharges is the delay between the income event and its potential impact on Medicare costs. A retiree could have one unusually high-income year, return to a much lower income afterward, and still receive an IRMAA determination based on that earlier tax information. When a major financial transaction is optional, estimating its effect before December 31 can provide more choices than discovering the consequences after the tax year closes. Beneficiaries who receive an IRMAA notice should verify the income information used and investigate whether a qualifying life-changing event gives them grounds to request a new determination. Medicare costs are an important part of retirement planning, and sometimes the decisions affecting those costs begin years before the higher premium appears.

Have you ever been surprised by a Medicare IRMAA surcharge after an unusually high-income year? Share your experience or questions in the comments.

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