If you are on Medicare and your income crosses certain thresholds, you pay more for Part B and Part D coverage. These surcharges — called IRMAA, or Income-Related Monthly Adjustment Amount — are determined using your income from two years prior. For 2026 Medicare premiums, the relevant income year is 2024.
IRMAA catches many retirees off guard. A one-time Roth conversion, the sale of a property, or even a large capital gain distribution from a mutual fund can push you over a threshold you did not know existed — resulting in hundreds or thousands of dollars in extra Medicare premiums two years later.
How IRMAA Works
IRMAA is tiered, not a smooth gradient. There are five income brackets above the standard threshold. Crossing into the next bracket triggers a sudden jump in monthly premiums — sometimes several hundred dollars more per month. These abrupt jumps are the 'cliffs' that retirement planners watch carefully.
Unlike tax brackets, which are marginal (only the income within the bracket is taxed at that rate), IRMAA brackets are flat — exceeding the threshold by even one dollar applies the higher premium to your entire monthly cost. This cliff structure makes IRMAA planning fundamentally different from income tax planning.
2026 IRMAA Part B Brackets (Individual / Married Filing Jointly)
- ≤ $106,000 / ≤ $212,000 — Standard premium ($185.00/month)
- $106,001–$133,000 / $212,001–$266,000 — Tier 1 (+$74.00/month)
- $133,001–$167,000 / $266,001–$334,000 — Tier 2 (+$185.00/month)
- $167,001–$200,000 / $334,001–$400,000 — Tier 3 (+$296.00/month)
- $200,001–$500,000 / $400,001–$750,000 — Tier 4 (+$407.00/month)
- > $500,000 / > $750,000 — Tier 5 (+$444.00/month)
For a married couple both on Medicare, these surcharges are per person. A couple in Tier 2 pays an extra $370 per month ($185 × 2), or $4,440 per year, on top of their standard premiums. Over a 20-year retirement, persistent Tier 2 surcharges cost a couple nearly $90,000 in additional premiums — money that could otherwise remain invested.
Part D IRMAA Surcharges
IRMAA also applies to Medicare Part D (prescription drug coverage), using the same income thresholds. The Part D surcharges are smaller — ranging from about $13 to $81 per month per person in 2026 — but they add up, especially for couples. Combined Part B and Part D IRMAA at Tier 5 can exceed $12,000 per year for a married couple.
What Counts as Income for IRMAA
IRMAA uses Modified Adjusted Gross Income (MAGI), which is your AGI plus tax-exempt interest income. This includes wages, Social Security benefits (the taxable portion), pension income, rental income, capital gains, IRA distributions, Roth conversions, and interest from municipal bonds. Notably, Roth IRA withdrawals do not count toward MAGI — which is one reason Roth conversions done before Medicare age can be so valuable.
One frequently overlooked detail: tax-exempt municipal bond interest, while not subject to income tax, is included in the IRMAA calculation. Retirees who hold large municipal bond positions for tax efficiency may find that the interest pushes them over an IRMAA threshold — an ironic outcome where tax-free income triggers a different kind of cost. Review your total MAGI including muni interest when planning around the cliffs.
Capital gain distributions from mutual funds also count toward MAGI. These are particularly problematic because they are unpredictable — the fund manager decides when to realize gains, and shareholders have no control over the timing. Retirees near an IRMAA cliff should consider switching from actively managed mutual funds to ETFs or index funds with lower distribution rates, or holding individual securities where gain realization is entirely under their control.
Roth Conversions and IRMAA
Every dollar you convert from a traditional IRA to a Roth counts as ordinary income in the year of conversion — and increases your MAGI for IRMAA purposes two years later. A $50,000 conversion in 2024 could push a single filer from the standard premium tier into Tier 1 or Tier 2, increasing their 2026 Medicare costs by $600 to $3,000 or more per year.
This creates a tension: Roth conversions save taxes long-term by reducing future RMDs, but they can cost you in IRMAA surcharges short-term. The right strategy depends on the size of your traditional IRA, how many years of conversions you need, and how close you are to an IRMAA cliff.
IRMAA cliffs are binary. One dollar over the threshold costs hundreds of dollars more. Precision matters more than it does for ordinary tax brackets.
How to Plan Around the Cliffs
The key is to project your total MAGI for the relevant income year — including Social Security, pension, investment income, and planned Roth conversions — and then convert only up to the IRMAA threshold you want to stay below. Stop the conversion $1,000–$5,000 below the cliff to create a buffer for unexpected income.
Be especially careful with capital gain distributions from mutual funds. These are reported in December but are often unpredictable. If you are close to a cliff, switch taxable holdings to ETFs or index funds with lower capital gain distributions, or hold individual securities where you control the timing of gains.
Strategies for Managing IRMAA
- Front-load Roth conversions before age 63 (the income year that affects your first Medicare premiums at 65).
- Use the two-year lookback to your advantage: if you know a high-income year is coming, accelerate or defer other income to avoid stacking.
- Harvest capital losses in the same year as a Roth conversion to offset some of the MAGI increase.
- Consider charitable donations from your IRA via Qualified Charitable Distributions (QCDs) after age 70½ — QCDs satisfy RMDs without increasing MAGI.
- Time the sale of property or business interests to avoid stacking with conversion income.
Case Study: The Cost of One Dollar Over the Cliff
Consider a single Medicare beneficiary with $95,000 of income from Social Security and pension, who plans a Roth conversion. The Tier 1 threshold for 2026 is $106,000. She has $11,000 of conversion room before hitting the cliff. If she converts $11,001 — just one dollar over — her Part B premium increases by $74/month ($888/year) and her Part D premium increases by approximately $13/month ($156/year). That single extra dollar of conversion costs $1,044 in additional Medicare premiums.
The math is clear: stop the conversion well below the cliff. A $5,000 buffer protects against unexpected income (a mutual fund capital gain distribution, a miscalculated pension adjustment) and costs far less than tripping the surcharge. In this example, converting $6,000 less reduces the tax savings by roughly $1,320 (at the 22% bracket) but avoids $1,044 in IRMAA — a near-breakeven that favors caution.
Life-Changing Event Exceptions
If your income dropped significantly due to a life-changing event — retirement, loss of income-producing property, divorce, or death of a spouse — you can request that Medicare use more recent income data by filing Form SSA-44. This is worth pursuing if you crossed an IRMAA threshold in a high-income year that no longer reflects your current situation.
Qualifying events include: marriage, divorce, death of a spouse, work stoppage, work reduction, loss of income-producing property, and loss of pension income. A voluntary Roth conversion does not qualify as a life-changing event, even if it was the cause of the income spike.
Frequently Asked Questions
How do I know if I am paying IRMAA?
Medicare sends an IRMAA determination letter (Form SSA-RM-0001) if your premiums will be higher than the standard amount. You can also check your income-related adjustment on your Medicare.gov account or your Social Security statement. The surcharge is deducted automatically from your Social Security check or billed directly if you are not yet collecting.
Is IRMAA the same every year?
No. IRMAA is recalculated each year based on your most recently available tax return (two years prior). If your income drops, your IRMAA surcharge can decrease or disappear entirely. The income thresholds are also adjusted annually for inflation, though in some years the adjustments are small.
Can I appeal an IRMAA determination?
Yes. If you experienced a qualifying life-changing event, file Form SSA-44 with the SSA. You can also appeal if you believe the IRS data used to determine your IRMAA was incorrect. Appeals are common and frequently successful when income has genuinely changed.
Do Roth IRA withdrawals affect IRMAA?
No. Qualified Roth IRA distributions are not included in MAGI and do not trigger IRMAA. This is one of the most powerful long-term benefits of Roth conversions: once the money is in a Roth, withdrawals are invisible to the IRMAA calculation. The pain of the conversion is temporary; the benefit lasts for the rest of your retirement.
Source: CMS — Medicare Part B Costs
Source: SSA — Form SSA-44 (Medicare IRMAA Life-Changing Event)