IRMAA, Fully Explained

Medicare

I've mentioned IRMAA in several letters as a "watch out." Time to give it a full one, because it's the retirement tax that catches the most people by surprise and it's the one with the strangest rules.

IRMAA stands for Income-Related Monthly Adjustment Amount. Plain English: if your income is above certain levels, Medicare charges you more for Part B and Part D. Sometimes a LOT more.

Cliffs, not ramps

Most of the tax code phases things in gradually. IRMAA doesn't. It uses hard thresholds, and crossing one by a single dollar moves you into the next tier for the entire year.

The 2026 tiers, for a married couple filing jointly (single filers use exactly half these amounts):

Under $218,000: standard Part B premium, $202.90/month per person. No surcharge. $218,000 to $274,000: roughly $284/month per person. $274,000 to $342,000: roughly $406/month. $342,000 to $410,000: roughly $527/month. $410,000 to $750,000: roughly $649/month. Over $750,000: roughly $689/month.

Part D gets its own surcharge stacked on top, running from about $14 to $91 extra per month per person across the same tiers.

So a couple at $217,999 pays about $4,870 a year in Part B premiums. A couple at $218,001 pays about $6,816, plus the Part D add-on. Nearly $2,000 more, for the both of them, for two dollars of income. That's the cliff.

The two-year lookback

Here's the rule that catches new retirees: Medicare doesn't use this year's income. It uses your tax return from TWO years ago.

Your 2026 premiums are set by your 2024 return. Your 2027 premiums by your 2025 return.

Which means the year you retire, your Medicare premium is being set by your last full working year, salary, bonus, and all. And any big income event, a business sale, a huge Roth conversion, a large capital gain, shows up as a surcharge two years later, when you may have forgotten it happened. People discover this from a letter, and the letter is never good news.

What counts (more than you think)

IRMAA runs on MAGI, which is your AGI plus tax-exempt interest. That means municipal bond interest counts. Roth conversions count. Capital gains count. IRA and 401k withdrawals count. Social Security's taxable portion counts.

Roth WITHDRAWALS don't count. Neither does the return of principal from a taxable account, only the gain. Neither do qualified charitable distributions. This is yet another place where "which account the money comes from" changes the answer, and it's not a coincidence.

The appeal almost nobody files

Here's the part with real money in it. If your income has dropped because of a "life-changing event," you can ask Social Security to use your CURRENT income instead of the two-year-old return.

Retirement counts. So does a reduction in work hours, the death of a spouse, divorce, and loss of income-producing property. You file Form SSA-44, attach evidence (a retirement letter from your employer, an estimate of this year's income), and if approved, your premium is reset based on the new, lower number.

Thousands of new retirees pay two years of surcharges they could have appealed away with one form. If you retired recently and your premium looks high, this is your homework this week.

The one thing you CANNOT appeal: a Roth conversion. The IRS treats that as a choice, not a life event. Which is exactly why conversions need to be modeled against these tiers before you do them, not discovered afterward.

Planning under the cliffs

The strategies, briefly:

Know your tier line and stay under it. In a conversion year, convert UP TO the line and stop. $217,000 of MAGI is a great year. $219,000 is a $2,000 mistake.

Front-load big income before 63. Since IRMAA looks back two years, income you recognize at 62 or younger never touches your Medicare premiums at all. The Golden Window's early years are IRMAA-free.

Route giving through qualified charitable distributions after 70 and a half. They satisfy RMDs without ever landing in MAGI, which can pull a household under a tier line.

Use Roth withdrawals as the release valve. In any year you're near a cliff, take the last needed dollars from the Roth instead.

And after retirement, appeal. SSA-44. It's the cheapest form you'll ever file.

IRMAA isn't a tax you can eliminate. It's a tax you can see coming, two years out, if you know where to look.