IRMAA is an income-based surcharge added to Medicare Part B and Part D premiums for beneficiaries whose modified adjusted gross income (MAGI) exceeds a certain threshold.1 Medicare's income-related monthly adjustment amount (IRMAA) catches many retirees off guard because it uses your MAGI from two years ago, not your current income. This two-year lag means your 2026 Medicare premiums depend on your 2024 tax return, creating a planning trap for anyone whose income fluctuates in retirement.
Why Medicare Uses a Two-Year Income Lookback for IRMAA
Understanding how IRMAA calculates premiums is essential for retirement planning. Medicare's income-related monthly adjustment amount (IRMAA) catches many retirees off guard. The surcharge on Part B and Part D premiums is calculated using your modified adjusted gross income (MAGI) from two years ago, not your current income. This two-year lag means your 2026 Medicare premiums depend on your 2024 tax return, creating a planning trap for anyone whose income fluctuates in retirement.
The Social Security Administration (SSA) determines IRMAA by pulling MAGI data directly from IRS tax returns filed two years prior.1 This lag exists because the IRS needs time to process returns and share income data with the SSA. By the time Medicare sets premiums for a given year, the most recent complete tax data available is from two years earlier.
For example, when Medicare calculates your 2026 Part B and Part D premiums, it uses the MAGI reported on your 2024 tax return. If you had a large capital gain in 2024 from selling a home or business, that income spike will determine your 2026 surcharge even if your 2026 income is much lower.
The SSA notifies beneficiaries of their IRMAA determination by mail each November for the following year.2 If your MAGI exceeds the base threshold — $109,000 for single filers or $218,000 for joint filers in 2026 — you will pay a surcharge on top of the standard Part B premium of $185.00 per month.3
Understanding the 2026 IRMAA Bracket Tiers and Surcharge Amounts
IRMAA operates as a tiered cliff structure. One dollar over a threshold triggers the full surcharge for that tier. The 2026 brackets impose surcharges ranging from $1,312.80 to $6,084 per person annually.3
| 2026 MAGI (Single) | 2026 MAGI (Joint) | Part B Surcharge (monthly) | Part D Surcharge (monthly) | Total Annual Surcharge |
|---|---|---|---|---|
| $109,000 or less | $218,000 or less | $0 | $0 | $0 |
| $109,001 – $137,000 | $218,001 – $274,000 | $95.70 | $13.70 | $1,312.80 |
| $137,001 – $170,000 | $274,001 – $340,000 | $241.30 | $35.30 | $3,319.20 |
| $170,001 – $500,000 | $340,001 – $750,000 | $393.10 | $57.50 | $5,407.20 |
| Over $500,000 | Over $750,000 | $428.60 | $78.50 | $6,084.00 |
Source: IRMAA brackets for 2026.3
The Part D surcharge is added to your prescription drug plan premium, not included in it. A beneficiary in the highest tier pays $428.60 extra per month for Part B plus $78.50 extra per month for Part D, totaling $6,084 per year in surcharges alone.4
How the Two-Year Lag Creates Planning Opportunities and Risks
The two-year lag creates a window for strategic planning. Suppose you are 63 in 2024 and plan to retire at 65. Your 2026 IRMAA will be based on your 2024 MAGI, which includes your final full year of salary. That high earned income could push you into a surcharge tier for 2026, even though your 2026 income will be much lower.
The risk works in reverse too. If you have a low-income year in 2024 due to a sabbatical or business loss, your 2026 premiums will be based on that low MAGI, potentially saving you thousands in surcharges.
The opportunity lies in timing. A retiree who knows their 2026 IRMAA will be based on 2024 income can plan 2025 and 2026 withdrawals to stay within lower brackets for future years. The lag means you can see your surcharge coming two years in advance and adjust accordingly.
Roth Conversion Timing to Minimize Future IRMAA Exposure
Roth conversions present a classic IRMAA timing dilemma. Converting a traditional IRA to a Roth IRA in 2024 adds the converted amount to your 2024 MAGI, which determines your 2026 IRMAA. A $100,000 conversion could push you from the base tier into Tier 2, adding $1,312.80 in annual surcharges for two people.3
However, the same conversion reduces your future required minimum distributions (RMDs) and taxable income. Consider a retiree who converts $50,000 in 2024. Their IRMAA increases by one tier for the following two years, costing roughly $1,300 extra per year in surcharges for a couple.3 But starting in 2027, their lower IRA balance produces smaller RMDs, potentially keeping them in a lower IRMAA bracket for the rest of their life.
The strategy works best when you convert in years when your MAGI is already low. If you retire mid-year and have only six months of salary in 2024, that year's MAGI may be low enough to absorb a conversion without crossing an IRMAA threshold. A typical scenario: a retiree who stops working in June 2024 has $75,000 in salary plus a $40,000 Roth conversion, keeping MAGI under the $109,000 single threshold.3
Qualifying for an IRMAA Appeal Through SSA Form 5605
If your income dropped after the two-year lookback period, you can appeal using SSA Form 5605. The SSA accepts appeals for qualifying life events: retirement, divorce, death of a spouse, or loss of income-producing property.5
You must file the appeal within 60 days of receiving your IRMAA determination letter. The form requires documentation of the life event — a retirement letter, divorce decree, or proof of reduced income. Suppose you retired in January 2025 but your 2026 IRMAA is based on your 2024 salary of $150,000. Filing SSA Form 5605 with your retirement date and expected 2026 income can reduce your surcharge to the base tier.
The most common appeal mistake is filing too late. Beneficiaries often assume the surcharge will correct itself when their income drops, but the SSA does not automatically recalculate. You must proactively file Form 5605 within the 60-day window.5
Strategic Timing of Retirement Withdrawals to Avoid Tier Hopping
Retirement account withdrawals count toward MAGI and can push you into a higher IRMAA tier. The cliff structure means one dollar over $109,000 (single) triggers the full Tier 1 surcharge of $1,312.80 per year.3
To avoid tier hopping, plan withdrawals to stay just under the threshold. If you are single and expect $105,000 in other MAGI, you can withdraw up to $4,000 from retirement accounts without crossing into Tier 1. Withdrawing $5,000 would cost you $1,312.80 in extra premiums — for example, a 26% effective tax on that additional $1,000.
A joint filer with $210,000 in MAGI1 can withdraw up to $8,000 before hitting the $218,000 threshold2. Withdrawing $9,0003 triggers the full surcharge. The strategy requires tracking your year-to-date MAGI and adjusting withdrawals accordingly.
Common Mistakes Retirees Make When Income Changes Mid-Year
The most frequent error is assuming Medicare uses current income. A retiree who sells a rental property in 2024 for a $60,000 gain may not realize that gain will determine their 2026 IRMAA. By the time they receive the surcharge notice in November 2025, the appeal window may have passed.
Another mistake is ignoring tax-exempt interest. Municipal bond interest is tax-free for federal income tax but counts toward MAGI for IRMAA purposes. A retiree earning, for example, $20,000 in municipal bond interest must include that amount when calculating their IRMAA exposure.
A third error is failing to coordinate spousal income. For joint filers, both spouses' income counts toward the MAGI threshold. If one spouse takes a large IRA distribution for a home purchase, that distribution affects both spouses' IRMAA for two years.
Your Next Step
Pull your most recent tax return and calculate your MAGI for the year that will determine your next IRMAA period. If you are 63 or older, look at your 2024 return to estimate your 2026 premiums. If your MAGI is within $10,000 of a threshold, adjust your current-year withdrawals or Roth conversion plans to stay under the limit. For anyone who experienced a qualifying life event after the lookback year, download SSA Form 5605 and prepare your documentation now — do not wait for the surcharge notice to arrive.
Footnotes
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https://www.bairdwealth.com/insights/wealth-management-perspectives/2022/04/managing-your-medicare-premiums ↩ ↩2 ↩3 ↩4
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https://incomelaboratory.com/irmaa-brackets-2026-guide ↩ ↩2 ↩3 ↩4 ↩5 ↩6 ↩7 ↩8
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https://www.kiplinger.com/retirement/medicare/medicare-premiums-2025-irmaa-for-parts-b-and-d ↩
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https://www.kiplinger.com/retirement/medicare/602937/you-can-appeal-a-medicare-premium-surcharge ↩ ↩2 ↩3