Medicare premiums
Medicare IRMAA: the premium cliff
For anyone on Medicare, or within two years of it, whose income is anywhere near $109,000 single or $218,000 joint. One dollar over a line costs a year of higher premiums, for each spouse, and the bill arrives two years after the income that caused it.
Most tax breaks come with an income limit, and the limit is often not what people expect. Cross it and the credit shrinks, the deduction disappears, or a surcharge appears. The IRS calls it a phase-out. Medicare has one too, and it is the one retirees feel most, because it arrives as a bigger deduction from the Social Security check rather than a line on the tax return, and because it arrives two years late.
It is called IRMAA, the income-related monthly adjustment amount. The standard Part B premium for 2026 is $202.90 a month. Above certain income levels Medicare adds a surcharge, in tiers, and at the top tier the Part B premium reaches $689.90 a month. There is a separate surcharge on Part D prescription coverage as well.
| Modified AGI, single | Joint | Part B premium | Part D surcharge |
|---|---|---|---|
| $109,000 or less | $218,000 or less | $202.90 | $0 |
| $109,001 – $137,000 | $218,001 – $274,000 | $284.10 (verify) | about $14 (verify) |
| $137,001 – $171,000 | $274,001 – $342,000 | $405.70 (verify) | about $37 (verify) |
| $171,001 – $205,000 | $342,001 – $410,000 | $527.30 (verify) | about $60 (verify) |
| $205,001 – $499,999 | $410,001 – $749,999 | $648.90 (verify) | about $83 (verify) |
| $500,000 or more | $750,000 or more | $689.90 | about $91 (verify) |
Modified AGI here is AGI plus tax-exempt interest. The first-tier thresholds and the standard and top premiums are from the booklet’s verified figures; the intermediate tiers are shown for shape and will be confirmed against the CMS notice in the December fact check. Married filing separately has its own, harsher schedule.
Three things that make it a cliff
The income it uses. Modified adjusted gross income, which is AGI plus tax-exempt interest. Municipal bond interest that is tax-free on the return counts in full here. For 2026 the surcharge begins above $109,000 for a single filer and $218,000 on a joint return.
It is a cliff, not a slope. One dollar over a line triggers the whole tier, for the whole year, for each spouse on Medicare. There is no partial surcharge, no proration.
It looks back two years. The 2026 premium is based on the 2024 return. The year a retiree takes a large IRA withdrawal, converts to a Roth, or sells a rental or a business, nothing happens to the premium. Two years later the surcharge appears, often after everyone has forgotten the reason, and it runs for twelve months.
Worked example: one dollar, $1,950
A married couple, both on Medicare, with $210,000 of income in 2024. In December 2024 one of them sold a few shares for an $8,500 gain, putting modified AGI at $218,500.
| Modified AGI $217,999 | Modified AGI $218,500 | |
|---|---|---|
| Part B premium, 2026, each | $202.90 | $284.10 (verify) |
| Part D surcharge, 2026, each | $0 | about $14 |
| Extra per person per month | about $95 | |
| Extra for the couple, 12 months of 2026 | about $2,290 | |
| Federal and Colorado tax on the $8,500 gain | about $1,650 |
The surcharge cost more than the tax on the gain that caused it. Selling in January 2025 instead of December 2024 would have moved the gain into a year with room under the line, or at least a different year to plan around.
When income drops
If income fell because of a life-changing event, Form SSA-44 asks Social Security to use a more recent year instead. The death of a spouse is on the list; so are retirement or reduced work hours, marriage, divorce, the loss of a pension, and the loss of income-producing property through a disaster (verify). A one-time gain from a sale is not a life-changing event, which is why timing the sale matters so much. The form goes to Social Security, not the IRS, with proof of the event and an estimate of the new year’s income, and it is worth filing the year the event happens rather than waiting for the surcharge letter.
Why a survivor gets hit
The joint line is twice the single line. A surviving spouse files single, so the same household income that cleared $218,000 comfortably can be over $109,000 by a wide margin, and the surcharge often shows up two or three years after the death. The death of a spouse is a listed event for Form SSA-44, but the form only helps if the survivor’s income actually dropped; if the pension and the IRA continued, it did not, and the surcharge stands. The planning for this belongs in the years when both spouses are alive, which is the subject of The widow’s penalty.
What keeps income under the line
Qualified charitable distributions. A gift from an IRA straight to a charity never enters income, so it never enters the IRMAA test. For a retiree who gives anyway, routing the gifts through the IRA from 70½ on is the single easiest way to stay under a line.
Roth withdrawals. They do not count. Roth conversions done in the years before Medicare, sized to land just under the lines, are a common strategy, and the converted money is then available in retirement without touching the test. Conversions done after 65 need the same care: each one is income in the IRMAA test two years later, and a conversion that saves 2% of tax but trips a tier can lose the saving to premiums.
Timing. A sale, a bonus or a large withdrawal that can be split across two calendar years often should be. Two years each $500 under a line beats one year $50,000 over it.
Not tax-exempt bonds. Municipal interest is added back for IRMAA, so moving money into munis to “keep income down” does nothing here.
Behind the scenes
Before a client sells a property, converts to a Roth, or takes an extra IRA withdrawal, we add the planned income to this year’s projected AGI and tax-exempt interest and checks the total against $109,000 or $218,000. It is a two-minute check that nobody asks for, because the premium increase is two years away and shows up on a Medicare notice, not the tax return. The second check is the Social Security worksheet, because the same dollar that trips IRMAA usually makes more of the benefit taxable too; the two effects are figured together, not one at a time.
The Colorado side
IRMAA is federal; Colorado plays no part in it. But the same planning that keeps income under the Medicare lines interacts with Colorado’s own lines: the $75,000 / $95,000 AGI test for the 55-to-64 Social Security subtraction and the $300,000 deduction addback. A Roth conversion sized for IRMAA should be checked against those too. The IRMAA surcharge itself, like all Medicare premiums, counts as a medical expense if you itemize.
What to bring your preparer
- Your most recent Medicare premium notice from Social Security (the letter that states which year’s income was used)
- Tax-exempt interest from Forms 1099-INT and 1099-DIV, since it counts here
- For a fall planning session: this year’s projected income and any sale, conversion or withdrawal under consideration
- If income dropped because of a listed event: the date and the documentation (retirement letter, death certificate, divorce decree) for Form SSA-44
- If one spouse is not yet on Medicare: the date they will be, since their first IRMAA year uses the return from two years before that
Questions people ask
I just retired and my income dropped. Why is my premium based on when I was working?
Because Medicare uses the return from two years ago. Retirement is a listed life-changing event; file Form SSA-44 with an estimate of this year’s income and Social Security will use that instead.
I sold my house. Will that raise my premium?
Only the taxable gain counts, and for most sellers the $250,000 / $500,000 exclusion keeps it out of AGI. A gain above the exclusion, or on a rental or second home, counts in full and is not a life-changing event.
Does the surcharge apply to both of us?
Yes, if both are on Medicare. Each spouse pays the tier’s premium, so the cost of crossing a joint line is doubled.
Is the surcharge deductible?
As a medical expense, if you itemize and your medical expenses exceed 7.5% of AGI. For most people it is not deductible in practice.
I appealed and won. Does the refund come automatically?
Social Security adjusts the premium going forward and refunds the excess already withheld from your benefit, usually within a couple of months of the decision.