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Medicare IRMAA: Why a High-Income Year Can Raise Your Premiums Two Years Later

By Smart Budget Sheets November 11, 2026
How IRMAA uses income from two years earlier.

US Medicare Part B and Part D premiums have an income-related surcharge, called IRMAA. It surprises people because it looks back two years.

How it works

  • Your 2027 premiums are based on your modified adjusted gross income (MAGI) from your 2025 tax return.
  • Above a threshold (a bit over $100,000 single and $200,000 married filing jointly for 2026), you pay a higher Part B premium plus an extra Part D amount. The surcharge rises in brackets.
  • It is recalculated every year, so a one-off high-income year affects one year of premiums, not the rest of retirement.

Common triggers

  • Selling a house, shares or a business with a large gain.
  • A big Roth conversion.
  • The last working year, with salary plus a payout.
  • Required minimum distributions on top of other income.

If your income dropped: form SSA-44

You can ask Social Security to use a more recent year if a “life-changing event” reduced your income: retirement or reduced work, marriage, divorce, death of a spouse, loss of a pension, or loss of income-producing property. Send form SSA-44 with proof, such as a retirement letter. A one-time gain from selling an asset is not by itself a qualifying event.

Planning around it

  1. Spread Roth conversions or large sales over several years to stay under a bracket line.
  2. Look at the brackets two years ahead of when you will be on Medicare (from about age 63).
  3. Qualified charitable distributions from an IRA (age 70.5+) lower MAGI.

Budget it

If a surcharge is coming, add the higher premium to next year’s retirement budget so it does not come out of the emergency fund.

Free tools

General information, not financial advice. Figures are rounded examples.

#personalfinance #budgeting #medicare
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