Medicare charges higher earners more — but not gradually. Cross an income line by a single dollar and your premium jumps for the whole year. The good news: those lines are visible two years ahead, which makes this one of the most manageable costs in retirement.
A surcharge that works like a cliff, not a ramp
Most people assume Medicare is a flat cost. It isn’t, once your income climbs. Higher-income beneficiaries pay an extra charge called IRMAA — the Income-Related Monthly Adjustment Amount — on top of their Part B and Part D premiums. In 2026, the standard Part B premium is $202.90 a month. At the top of the income scale, it’s $689.90 a month, per person.
Here’s what makes IRMAA different from the income tax you’re used to. Tax brackets are marginal — only the dollars above each threshold get taxed at the higher rate. IRMAA is a cliff. Cross a threshold by a single dollar and the full surcharge for that tier applies to your premiums for the entire year. There’s no easing into it.
The first threshold in 2026 is $109,000 of income for a single filer and $218,000 for a married couple. From there it climbs in steps. And it applies per person — for a couple, both spouses pay the surcharge once their joint income crosses a line.
Your 2026 premium was set by your 2024 tax return
This is the part that surprises people most. IRMAA runs on a two-year lookback. Your 2026 Medicare premiums are based on your income from 2024 — the most recent return the Social Security Administration has on file.
That delay is exactly why IRMAA catches retirees off guard. A one-time event in a single year — a large Roth conversion, the sale of a rental property, an unusually big required distribution, a concentrated stock sale — can quietly push your income over a threshold and show up as a higher Medicare bill two years later, long after you’ve forgotten the transaction that caused it.
What actually counts as income
IRMAA is based on your modified adjusted gross income — your adjusted gross income plus a few add-backs. The one that trips people up is tax-exempt interest. Municipal bond interest is free of federal income tax, but it still counts toward your MAGI for IRMAA. So a portfolio built for tax efficiency can still push you over a Medicare threshold. The taxable portion of a Roth conversion or a capital gain counts too.
The levers that actually work
Because the thresholds are published and predictable, IRMAA is manageable in a way most retirement costs aren’t. A few of the moves that matter:
Size conversions to the line. If you’re doing Roth conversions, convert up to just below the next threshold rather than blowing through it. Spreading conversions across several years keeps each year’s income under control instead of spiking it.
Use QCDs. For the charitably inclined who are taking required distributions, a qualified charitable distribution satisfies the RMD without adding to your MAGI — money goes straight from the IRA to the charity and never lands on your return.
Choose which account to draw from. In a year you’re near a threshold, pulling from a Roth or from the basis in a taxable account can fund your spending without lifting your MAGI.
Time the big one-time sales. A property or business sale is often the single event that triggers IRMAA. Knowing where the lines sit before you sell — not after — is the whole game, because once the calendar year closes, your MAGI is locked.
The first-year trap, and the appeal nobody uses
The cruelest version of IRMAA hits in your very first year on Medicare. Because the surcharge is priced off income from two years earlier, your first Medicare premium is often based on your last full year of working — when your income was at its peak.
There’s a fix, and it’s underused. If your income has dropped because of a qualifying life-changing event — retirement, marriage, divorce, the death of a spouse, or a work stoppage — you can file Form SSA-44 to ask Social Security to use your current income instead of the two-year-old figure. For legitimate events, these appeals are routinely approved. Many people simply don’t know the form exists.
IRMAA is one of the few costs in retirement you can see coming two years out. That’s not a trap — it’s a planning window.
None of this requires predicting the market or timing anything exotic. It requires knowing where the thresholds are and watching your income against them before each year closes. The cliff only surprises the people who aren’t looking for it — and with coordinated tax and distribution planning, most of them never need to be surprised at all.
Key takeaways
• IRMAA is a Medicare surcharge on Part B and Part D for higher-income beneficiaries, and it works as a cliff: $1 over a threshold triggers the full surcharge for the year.
• In 2026 it begins at $109,000 of income (single) or $218,000 (married filing jointly), and it applies per person.
• Premiums are based on income from two years prior, so a one-time spike shows up on your Medicare bill later — often as a surprise.
• MAGI includes tax-exempt municipal bond interest, which catches tax-efficient investors off guard.
• The levers — sizing Roth conversions below a threshold, spreading them out, QCDs, choosing which account to draw from, timing big sales — all work because the thresholds are known in advance.
• If income drops from a qualifying life event, Form SSA-44 can lower or remove the surcharge; it’s underused.
Common questions about IRMAA
What is IRMAA?
It’s the Income-Related Monthly Adjustment Amount — a surcharge added to Medicare Part B and Part D premiums for beneficiaries whose income exceeds set thresholds. In 2026 it starts at $109,000 (single) and $218,000 (married filing jointly).
Why is it called a cliff?
Because it isn’t marginal like income tax. Going one dollar over a threshold applies the full surcharge for that entire tier to your premiums for the whole year, rather than just taxing the dollars above the line.
Why does my old tax return determine my premium?
Medicare uses a two-year lookback. Your 2026 premiums are based on your 2024 income, because that’s the most recent return Social Security has. It’s also why a one-time income event can affect you two years later.
Does municipal bond interest count?
Yes. Even though muni interest is free of federal income tax, it’s added back into the modified adjusted gross income used for IRMAA. Tax-free for income tax doesn’t mean invisible to Medicare.
Do both spouses pay it?
Yes. For a married couple, once joint income crosses a threshold, each spouse on Medicare pays the surcharge — so it effectively doubles.
Can I appeal it?
If your income dropped because of a qualifying life-changing event — retirement, marriage, divorce, death of a spouse, or a work stoppage — you can file Form SSA-44 to have Social Security use your current income. Legitimate appeals are commonly approved.
This article is for educational purposes only and is not tax advice. Consult your CPA or tax advisor before acting on anything described here.
Brent Rupnow is a Registered Representative with, and Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Via Luce Capital is not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Via Luce Capital, and may also be employees of Via Luce Capital. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of Via Luce Capital.