Medicare and IRMAA — the income brackets that surprise retirees.

IRMAA stands for the Income-Related Monthly Adjustment Amount. It's the surcharge Medicare adds to Part B and Part D premiums when modified adjusted gross income clears certain thresholds. Two features make it a planning issue: the brackets are cliffs (one extra dollar moves you to the next tier), and the income that determines today's premium is your tax return from two years ago. By the time you see the bill, the planning window has closed.

How the two-year lookback actually works

Social Security sets your 2026 Medicare premium based on the AGI on your 2024 Form 1040. Your 2027 premium will be based on 2025. This is why a single high-income year — a Roth conversion done in a hurry, a deferred-compensation lump sum, a big realized capital gain, the sale of a rental property — shows up as a premium spike two Januarys later. The lookback resets every year, so a one-time event causes a one-year premium hit and then disappears, but a sustained increase in income causes a sustained increase in premium.

The 2026 brackets — and what each one costs

For 2026, individuals with MAGI at or below roughly $106,000 (married filing jointly at or below $212,000) pay the standard Part B premium. Above that, five tiers stack on additional charges that escalate steeply: the highest bracket adds well over $400 per month to Part B alone, plus another $80+ to Part D. For a married couple where both spouses are on Medicare, every IRMAA surcharge is paid twice. The top-tier annual cost for a couple can exceed $14,000 in surcharges alone, on top of the standard premiums.

What counts as MAGI for IRMAA

MAGI for IRMAA purposes is AGI plus tax-exempt municipal bond interest. That last piece surprises people: muni interest is federal-tax-free but it still pushes you toward higher Medicare premiums. Other items that count: traditional IRA and 401(k) withdrawals (including RMDs), Social Security benefits to the extent taxable, capital gains (short and long), dividends (qualified and ordinary), pension income, rental income, business income, and conversion income from Roth conversions. Items that don't count: Roth IRA qualified distributions, HSA qualified withdrawals, QCDs from traditional IRAs, return of basis, and loan proceeds.

The bracket-management toolkit

Plan in advance for the year you'll cross 63 — that's the tax year that determines your first IRMAA assessment at age 65. From there, every year's tax return matters for two years out. A few moves that help: spread Roth conversions across multiple years so each year stays under the next bracket, harvest capital gains in years your other income is naturally low, take pension lump sums or deferred-comp distributions in a year you're already in a high bracket rather than a low one, and use QCDs once you reach 70½ to satisfy RMDs without adding to AGI.

Roth conversions — the IRMAA arithmetic

The instinct is to look at marginal income-tax brackets and convert up to the top of a bracket. That's right as far as it goes, but the IRMAA tier boundaries don't line up with federal tax brackets, and a $1 overshoot on an IRMAA cliff can cost a couple $2,500+ in extra Medicare premium two years later. When we model conversion size, we're solving for two constraints at once: the income-tax bracket and the IRMAA tier. The IRMAA tier is often the binding one.

Capital gains and asset location

Long-term capital gains are taxed at 0%, 15%, or 20%, but they all count toward MAGI for IRMAA. A year where you realize a large gain — selling a concentrated stock position, an inherited rental property, a business interest — can push two years of Medicare premiums into a higher tier. Strategies: stage sales across multiple tax years, harvest gains in years before Medicare enrollment, use a charitable remainder trust or donor-advised fund for appreciated stock you'd otherwise sell, and pay attention to where your bond holdings live (taxable interest counts; muni interest still counts; the only true escape is Roth or HSA).

Filing the SSA-44 — a life-changing-event appeal

If a life-changing event reduced your income relative to what the lookback year shows, file Form SSA-44 to request IRMAA reconsideration. Qualifying events: marriage, divorce, death of a spouse, work stoppage or reduction (this includes retirement), loss of pension income, loss of income-producing property. The form takes 15 minutes and is processed by a local Social Security office. Most retirees should file it the year they retire — your premium was set based on income from your last working year, but you no longer have that income. SSA-44 isn't an automatic process; you have to ask.

Coordination with Social Security claiming

For couples deciding when each spouse files for Social Security, IRMAA enters the math. Claiming early reduces benefit but also keeps taxable income lower, which can help during the conversion runway before RMDs start. Delaying claims while drawing more aggressively from IRAs raises AGI more in those years — and that's the lookback that sets future IRMAA. We solve the joint problem rather than each piece in isolation.

When IRMAA self-corrects — and when it doesn't

The good news: IRMAA is recalculated annually from the most recent return on file. A one-time income spike causes a one-year premium increase and resolves itself. The less-good news: people whose income stays elevated (large RMDs, sizable pensions, rental property income) face IRMAA every year, and the brackets get tighter as Medicare premiums rise. Planning ahead matters more for retirees with steady high-six-figure or seven-figure portfolio income than for those with one-time events.

What this looks like in a Houston conversation

For most Houston-area clients, the IRMAA conversation comes up first when they're three to five years from Medicare. We map the years between then and 73 (RMD start age) and look for windows where conversions, gain realization, or income shifting can compress the long-run tax-plus-IRMAA bill. We then check the SSA-44 conditions at retirement and refile each year a qualifying event occurs. The dollars at stake — over a couple's 20+ years on Medicare — are often well into six figures.