IRMAA Explained: The Medicare Surcharge That Catches Retirees Off Guard

Key Takeaways

• IRMAA is a surcharge on Medicare Part B and Part D premiums that applies to higher-income beneficiaries — and “higher income” starts lower than most people think ($97,000 for individuals, $194,000 for married couples).
• It uses a two-year look-back — your 2026 premiums are based on your 2024 tax return, which means income decisions you made two years ago are affecting your healthcare costs today.
• A single dollar above a threshold triggers the full surcharge for that tier — IRMAA uses cliff-based brackets, not gradual phase-ins.
• Common triggers include Roth conversions, capital gains events, home sales, and RMDs — any income spike can push you over a threshold unexpectedly.
• You can appeal IRMAA if you’ve experienced a qualifying life-changing event that reduced your income, such as retirement, divorce, or death of a spouse.

Table of Contents

1. What Is IRMAA and Why Does It Exist?
2. The 2026 IRMAA Brackets
3. The Two-Year Look-Back: Why 2024 Income Matters Now
4. Myth: Only Wealthy People Pay IRMAA
5. The Five Most Common IRMAA Triggers
6. Myth: IRMAA Is Permanent Once Triggered
7. How to Appeal an IRMAA Determination
8. Strategies to Manage or Avoid IRMAA
9. IRMAA and Your Overall Retirement Tax Plan
10. FAQ

What Is IRMAA and Why Does It Exist?

IRMAA stands for Income-Related Monthly Adjustment Amount. Despite the bureaucratic name, the concept is straightforward: if your income exceeds certain thresholds, you pay more for Medicare Part B and Part D.

Think of it as a means-tested surcharge. The government’s logic: higher-income beneficiaries can afford to pay a larger share of their Medicare costs. Whether you agree with that philosophy or not, it’s the law — and it applies automatically unless you appeal.

The surcharge is added on top of your standard premium. So while most beneficiaries pay $202.90 per month for Part B in 2026, a beneficiary subject to IRMAA could pay anywhere from $284.10 to $689.90 per month — the same coverage, just a higher price tag.

The reason IRMAA catches people off guard is the two-year lag. Your 2026 IRMAA is based on your 2024 modified adjusted gross income (MAGI). By the time you get the surcharge notice, the income event that triggered it is ancient history — and there’s nothing you can do to change that year’s tax return.

The 2026 IRMAA Brackets

Here are the 2026 IRMAA brackets based on your 2024 MAGI:

Single Filers

Married Filing Jointly

Critical detail: these are cliff-based brackets. A married couple with MAGI of $194,000 pays $202.90/month. A couple with MAGI of $194,001 — just one dollar more — pays $284.10/month. That single dollar triggers an additional $81.20 per month per person in Part B alone. For a couple both on Medicare, that’s $1,949 per year in extra premiums.

Thomas’ Take: I call IRMAA the “retirement stealth tax” because it operates outside the income tax system, comes with a two-year delay, and hits cliff-style instead of gradually. Three attributes designed to catch people off guard. The solution is knowing the thresholds and planning around them.

The Two-Year Look-Back: Why 2024 Income Matters Now

IRMAA’s two-year look-back is the feature that creates the most confusion and frustration. Here’s how the timeline works:

• 2024 tax return (filed in April 2025) → determines your 2026 Medicare premiums
• 2025 tax return (filed in April 2026) → determines your 2027 Medicare premiums
• 2026 tax return (filed in April 2027) → determines your 2028 Medicare premiums

This means if you did a large Roth conversion in 2024, you might not feel the Medicare impact until January 2026. And any income moves you make today in 2026 won’t hit your Medicare premiums until 2028.

The SSA determines your IRMAA each year and sends you a notice (usually in late November or December) showing your premium amount for the coming year. If your income has changed significantly, you have the option to appeal — but only under specific circumstances.

Myth: Only Wealthy People Pay IRMAA

This is one of the most dangerous myths in retirement planning. People hear “income-related surcharge” and assume it only applies to millionaires. It doesn’t.

For a single filer, IRMAA kicks in at $97,001 in MAGI. That’s not hard to reach in retirement when you add up:

• Social Security: $28,000
• Pension: $24,000
• RMD from a $500,000 IRA: $19,000
• Capital gains from a mutual fund: $8,000
• A modest Roth conversion: $20,000

Total: $99,000 — and now you’re paying IRMAA.

For married couples, the $194,001 threshold can be reached by two people who each have moderate Social Security benefits, a pension, and normal investment income. You don’t need to be “wealthy” — you just need a retirement income that includes multiple sources.

The issue is compounding: many retirees have done a good job saving across multiple account types, and when those accounts all start producing income simultaneously (Social Security + pension + RMDs + investment income), the combined total pushes past IRMAA thresholds even if no single source seems large.

The Five Most Common IRMAA Triggers

Based on common patterns in Medicare planning, here are the five income events that most commonly — and most unexpectedly — trigger IRMAA:

Trigger 1: Roth conversions. The converted amount counts as taxable income and is added to your MAGI. A $100,000 Roth conversion can easily push you into a higher IRMAA tier. This is why I always model IRMAA exposure before recommending a conversion strategy.

Trigger 2: Capital gains from selling a home or investment property. A home sale with a large capital gain (above the $500,000 exclusion for married couples) or sale of rental property can create a one-time income spike that triggers IRMAA two years later.

Trigger 3: Required minimum distributions. As traditional IRA and 401(k) balances grow, RMDs get larger each year. By your late 70s and 80s, RMDs alone may push you above IRMAA thresholds — especially after the loss of one spouse shrinks the household from married-filing-jointly brackets to single-filer brackets.

Trigger 4: Capital gains distributions from mutual funds. Even if you didn’t sell any investments, your mutual fund can distribute taxable capital gains at year-end. In strong market years, these distributions can be substantial and unexpected.

Trigger 5: One-time income events. Severance payments, lump-sum pension payouts, inherited IRA distributions, business sale proceeds, or settling a legal claim — any one-time income spike flows through to MAGI and can trigger IRMAA two years later.

Myth: IRMAA Is Permanent Once Triggered

Here’s good news that many retirees don’t know: IRMAA is recalculated every year based on the applicable look-back year. If your income drops in a subsequent year, your IRMAA can decrease or disappear entirely.

Consider this hypothetical: Linda sold her rental property in 2024, generating a $150,000 capital gain that pushed her 2024 MAGI to $260,000. Her 2026 IRMAA is based on that spike and costs her an additional $2,436 per year. But in 2025, without the property sale, her MAGI drops to $85,000. Her 2027 IRMAA will be $0.

IRMAA is not a permanent punishment — it’s an annual determination. One bad year doesn’t mean permanent surcharges. However, if your income is consistently above the thresholds (due to growing RMDs, for example), the surcharge will recur every year.

How to Appeal an IRMAA Determination

If your income has significantly changed due to a qualifying life-changing event, you can ask the SSA to use a more recent year’s income instead of the standard look-back year.

Qualifying life-changing events include:

• Marriage, divorce, or annulment
• Death of a spouse
• Work stoppage or work reduction (retirement counts)
• Loss of income-producing property (due to disaster or other event)
• Loss of pension income
• Employer settlement payment

To appeal, file SSA Form SSA-44 with documentation of the event and your estimated current-year income. The SSA will review and may adjust your IRMAA.

Example: You retired in January 2026 after a career earning $180,000. Your 2024 tax return (while still working) shows $185,000 MAGI — triggering IRMAA. But your 2026 income in retirement will be $72,000. You can file SSA-44, document your retirement as a work stoppage, and request that SSA use your projected 2026 income instead. If approved, your IRMAA would be eliminated for 2026.

Pro Tip: File the SSA-44 appeal as early as possible. Processing can take weeks, and in the meantime, the higher premiums continue to be deducted from your Social Security check. Once approved, the SSA will refund any overpayments.

Strategies to Manage or Avoid IRMAA

Strategy 1: Know the thresholds cold. Memorize (or post on your refrigerator) the IRMAA threshold that applies to your filing status. Before any financial decision that increases income, calculate whether it pushes you over.

Strategy 2: Size Roth conversions below the cliff. If your current-year MAGI is $180,000 (married filing jointly), you have $14,000 of room before the $194,000 IRMAA threshold. Don’t convert $20,000 — convert $13,000 and save $1,949+ in annual surcharges two years from now.

Strategy 3: Use QCDs to reduce MAGI. Qualified charitable distributions from your IRA are excluded from MAGI entirely. If charitable giving is part of your plan, routing it through QCDs instead of writing checks from your bank account directly lowers your IRMAA-relevant income.

Strategy 4: Manage capital gains timing. If you’re selling appreciated assets, consider spreading sales across tax years to keep each year’s income below the IRMAA cliff. Selling $200,000 of stock in one year might trigger IRMAA; selling $100,000 in each of two years might keep you under.

Strategy 5: Consider tax-exempt bonds. Municipal bond interest is tax-free for federal income tax purposes — but it IS included in the MAGI calculation for IRMAA. However, other tax-exempt income strategies, like Roth IRA distributions, are NOT included in MAGI for IRMAA. A strong Roth balance provides income without IRMAA consequences.

IRMAA and Your Overall Retirement Tax Plan

IRMAA doesn’t exist in isolation — it’s one piece of a larger retirement tax puzzle that includes federal income tax brackets, Social Security taxation, state income taxes, and capital gains rates.

The retirees who manage this puzzle best are the ones who model all these interactions before making major income decisions. A Roth conversion that saves $3,000 in future income taxes but costs $3,800 in IRMAA surcharges is a net negative. But the same conversion in a year when your income is lower might be a net positive.

This is why I believe retirement tax planning should be an annual process, not a one-time plan. Every November, review your year-to-date income against all the relevant thresholds — brackets, IRMAA cliffs, Social Security taxation tiers, and capital gains breakpoints. Then make your year-end moves with the full picture in mind.

FAQ

Is IRMAA tax-deductible? IRMAA surcharges are considered Medicare premiums, and Medicare premiums may be deductible as a medical expense if you itemize and your total medical expenses exceed 7.5% of your AGI. For most retirees who take the standard deduction, IRMAA is not deductible. Self-employed retirees may be able to deduct Medicare premiums (including IRMAA) through the self-employed health insurance deduction.

Does Roth IRA income count toward IRMAA? No. Qualified Roth IRA distributions are not included in your modified adjusted gross income for IRMAA purposes. This is one of the most powerful advantages of having a substantial Roth balance in retirement — you can take withdrawals without affecting your Medicare premiums. This is precisely why strategic Roth conversions before Medicare enrollment can pay off for decades.

Can both spouses in a married couple be charged IRMAA? Yes. IRMAA is charged per person on Medicare, but determined by household MAGI. If a married couple has joint MAGI above $194,000, both spouses pay the surcharge. The amounts shown in the bracket tables are per person — so a couple in the first IRMAA tier pays double the surcharge.

How is MAGI calculated for IRMAA? IRMAA uses modified adjusted gross income, which is your AGI plus tax-exempt interest income (like municipal bond interest). It includes wages, Social Security benefits, pensions, RMDs, capital gains, rental income, and Roth conversion amounts. It does NOT include Roth IRA distributions, life insurance proceeds, or gifts.

What if I’m newly retired and my income dropped dramatically? File SSA Form SSA-44 with documentation of your retirement (a letter from your former employer works). Request that the SSA use your current-year estimated income instead of the two-year look-back. If your current income is below the IRMAA threshold, the surcharge should be removed. This is one of the most common — and most successful — IRMAA appeals.

IRMAA Is Manageable When You See It Coming

The retirees who get burned by IRMAA are the ones who didn’t know it existed or didn’t plan around it. The retirees who manage it successfully are the ones who treat IRMAA thresholds as guardrails — not obstacles, but boundaries that inform their income decisions every year.

If you’re approaching Medicare or already enrolled and wondering how IRMAA affects your retirement income plan, I can help you map the thresholds against your specific situation.

Thomas Clark is a Senior Lead Wealth Advisor at Confluence Capital Management, LLC. Investment advisory services offered through Altitude Capital Management, LLC, an SEC-registered investment advisor. The information provided is for educational and informational purposes only and does not constitute personalized investment advice. Past performance is not indicative of future results. Consult with a qualified financial professional before making any investment decisions.

Thomas Clark

Thomas Clark is a Series 65 licensed investment advisor and experienced trader. He specializes in investing, retirement planning, and market analysis, helping individuals build wealth and make informed financial decisions.