Most retirees know what they'll pay for Medicare. They've seen the standard Part B premium, they've budgeted for it, and they move on. Then the notice arrives. The premium is $400 higher per month than expected — for both you and your spouse — and there's no billing error. It's IRMAA.

IRMAA stands for Income-Related Monthly Adjustment Amount. It's a surcharge the federal government adds on top of your standard Medicare Part B and Part D premiums when your income exceeds certain thresholds. It's not a penalty. It's not a tax. But it functions like both — and if you don't see it coming, it can cost you thousands of dollars a year with almost no recourse once the determination is made.

We bring this up with every client approaching retirement or already in it because the trigger isn't your current income. It's your income from two years ago. That lag catches people off guard more than almost anything else in the tax code.

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The Two-Year Lookback — Why 2024 Income Sets Your 2026 Premium

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Medicare bases your IRMAA determination on the most recent tax return the IRS has processed. For 2026 premiums, that's your 2024 return. The income figure they use is your Modified Adjusted Gross Income — MAGI — which for IRMAA purposes is your adjusted gross income plus tax-exempt interest.

That two-year delay is where the problems start. A retiree who sold a rental property in 2024 at a $300,000 gain sees that income reflected in 2026 Medicare premiums — long after the money has been spent, reinvested, or allocated elsewhere. By the time the IRMAA notice arrives, most clients have forgotten the transaction that triggered it.

Here's what counts toward IRMAA income: wages, the taxable portion of Social Security benefits, traditional IRA and 401(k) withdrawals, capital gains from investment sales, interest and dividends, rental income, and Roth conversions. That last one deserves its own conversation, and we'll get to it.

One critical distinction: Roth IRA withdrawals do not count toward IRMAA income. Money coming out of a Roth is not included in MAGI. That's one of the reasons Roth conversions — done at the right time and in the right amounts — are such a powerful retirement tool. You pay the tax now to avoid the income hit later, including the IRMAA exposure that comes with it.

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2026 IRMAA Thresholds — The Numbers That Matter

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The thresholds are straightforward, but the consequences of crossing them are not proportional. A single dollar over a threshold moves you into the next tier for an entire year of premiums.

For single filers, income up to $106,000 means you pay the standard Part B premium — no surcharge. Between $106,001 and $133,000, you're at the first IRMAA tier. The brackets continue through $133,001–$167,000, $167,001–$200,000, $200,001–$500,000, and above $500,000 at the highest tier.

For married filing jointly, the standard premium applies up to $212,000. The tiers then run through $212,001–$266,000, $266,001–$334,000, $334,001–$400,000, $400,001–$750,000, and above $750,000.

At the first IRMAA tier for 2026, you're looking at roughly $70 more per month per person for Part B alone. At the highest tier, it's over $400 extra per month per person. For a married couple both on Medicare, the highest IRMAA level adds more than $9,600 a year just in Part B surcharges — before you even get to Part D.

These thresholds are adjusted annually, so the exact numbers shift. But the structure stays the same, and the cliff effect at each tier boundary doesn't change. We've seen clients come in $200 over a threshold and pay an additional $1,700 in premiums for the year. That's not a typo.

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The Events That Trigger IRMAA — And Why They Catch People Off Guard

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Steady-income retirees living on Social Security and modest withdrawals often stay below IRMAA thresholds without much effort. The clients who get hit are the ones who have a one-time income event they didn't think to connect to Medicare.

Large Roth conversions are the most common trigger we see. A client converts $150,000 from a traditional IRA to a Roth in a single year. The conversion shows up as ordinary income on that year's return, pushing MAGI well above the threshold. Two years later, the IRMAA surcharge kicks in. The conversion itself may have been the right long-term move, but the timing and amount needed more planning.

Selling a home or investment property is the second most common. A San Diego homeowner sells a property with a $400,000 capital gain that exceeds the $250,000 exclusion ($500,000 for married filers). The taxable portion flows into MAGI. If the sale wasn't coordinated with Medicare threshold awareness, the IRMAA hit comes as a complete surprise.

Other triggers include stock or business sales with large realized gains, the start of Required Minimum Distributions — especially for retirees who deferred until 73 and have substantial IRA balances — and severance or retirement payouts in the year someone leaves work. Each of these can push income into a higher IRMAA tier for a single year, resulting in elevated premiums two years down the road.

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Strategies That Actually Reduce IRMAA Exposure

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This is where planning earns its keep. IRMAA isn't inevitable for high-income retirees — it's manageable. But it requires looking at income across multiple years, not just the current one.

Spreading Roth conversions over several years is the most effective strategy we use. Instead of converting $200,000 in one year and spiking MAGI, we model conversions of $50,000 to $80,000 annually across a four- or five-year window, keeping income below or within a manageable IRMAA tier each year. The total conversion amount is the same. The total IRMAA cost is dramatically lower — or eliminated entirely.

Managing capital gains timing is the next lever. If you're selling appreciated stock or property, the year you choose to close matters. We run projections to see whether deferring a sale by a few months — or accelerating it — keeps income below a threshold in a given tax year. Sometimes a $5,000 difference in timing avoids a $3,400 IRMAA surcharge.

Qualified Charitable Distributions are another tool, and an underused one. If you're over 70½ and making charitable donations, you can direct up to $105,000 per year (2024 limit, indexed) from your IRA directly to a qualifying charity. The distribution satisfies your RMD but doesn't show up as income on your return. That keeps MAGI lower and can keep you below an IRMAA threshold that an equivalent cash donation followed by a standard IRA withdrawal would have crossed.

Coordinating all retirement income sources — which accounts you draw from, in what order, and in what amounts — is where the multi-year projection comes in. We build models that show what happens to MAGI, tax brackets, and IRMAA exposure under different withdrawal sequences. Drawing more from Roth accounts in a year when other income is elevated, or pulling from taxable brokerage accounts instead of an IRA, can make the difference between sitting at $210,000 MAGI and sitting at $215,000. On paper that's a $5,000 difference. In real dollars, it's a full IRMAA tier.

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The Appeal Option — When Income Drops After the Lookback Year

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There is an avenue for relief that many retirees don't know about. If your income has dropped significantly since the tax year used for your IRMAA determination, you can file Form SSA-44 — Medicare Income-Related Monthly Adjustment Amount Life-Changing Event — to request a new initial determination based on your current or more recent income.

Qualifying life-changing events include retirement or reduction in work hours, divorce or annulment, death of a spouse, loss of income from a pension or annuity, and loss of income-producing property. The key is that the event must have caused a significant income decrease compared to the year the IRMAA was based on.

We help clients file SSA-44 appeals regularly. A client who retired in 2025 and had high income in 2024 from final-year bonuses and stock vesting shouldn't pay elevated 2026 premiums based on an income level they'll never see again. The appeal process works — but you have to know it exists and file it correctly.

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The Cliff Effect — Why One Dollar Matters

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IRMAA thresholds are not graduated the way tax brackets are. There's no proportional increase. You're either below a threshold or above it, and being $1 above it costs you the full surcharge for the entire year.

That's the detail that makes IRMAA planning different from standard tax planning. With income tax, an extra dollar of income costs you the marginal rate on that dollar — maybe 24 or 32 cents. With IRMAA, an extra dollar of income at a threshold boundary can cost you $840 to $4,000 or more in additional annual premiums. Per person. For a married couple, double it.

We've had clients where a single capital gains distribution from a mutual fund — not even a sale they initiated — pushed them $600 over a threshold. The result was $1,680 in additional premiums for the year. That's the kind of outcome that proper planning prevents.

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When IRMAA Planning Should Start

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The answer is before retirement, not after the first IRMAA notice arrives. Ideally, IRMAA projections become part of your tax planning in the three to five years before you enroll in Medicare. That's the window where Roth conversion strategies, asset sale timing, and income sequencing have the most impact.

But even if you're already on Medicare and already paying IRMAA surcharges, there's usually something that can be done. Adjusting withdrawal strategies, implementing QCDs, or restructuring how income flows across tax years can reduce or eliminate the surcharge going forward. The two-year lookback means changes you make today affect premiums two years from now — which is exactly why acting sooner matters.

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San Diego Tax Associates builds multi-year IRMAA projections into every retirement tax plan. If you're approaching Medicare enrollment, already paying surcharges, or planning a Roth conversion or property sale, we'll model the impact before you make the move — not after.

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