What Is IRMAA?
IRMAA is an extra monthly charge added to Medicare Part B and Part D for people with higher income. It is generally based on modified adjusted gross income from two years earlier because that is the most recent tax return Medicare usually has available when premiums are set. Retirement decisions such as Roth conversions, IRA withdrawals, capital gains, and required minimum distributions can all affect IRMAA.
What Does IRMAA Stand For?
IRMAA stands for Income-Related Monthly Adjustment Amount.
That is a long name for a relatively straightforward idea: higher-income Medicare beneficiaries may pay more for Medicare Part B and Part D.
Medicare Part B generally covers services such as doctor visits, outpatient care, certain home health services, durable medical equipment, and other medical services. In 2026, the standard Part B premium is $202.90 per month. If IRMAA applies, Medicare adds an extra amount to that monthly premium.
IRMAA can also apply to Medicare Part D prescription drug coverage. Part D works a little differently because your prescription drug coverage usually comes from a private insurance company.
You typically pay your regular Part D plan premium to the insurance company that provides your drug plan. If IRMAA applies, the surcharge is paid to Medicare, often through Social Security withholding or a Medicare bill. In other words, Part D IRMAA does not replace your drug plan premium. It is an extra Medicare charge on top of it.
Who Pays IRMAA?
You may pay IRMAA if your modified adjusted gross income is above the annual threshold for your tax filing status.
For 2026 Medicare premiums, IRMAA begins when income is above:
$109,000 for single filers
$218,000 for married couples filing jointly
Those thresholds are based on modified adjusted gross income, not total assets. A retiree with a large portfolio may not owe IRMAA in a low-income year, while a retiree with a smaller portfolio could owe IRMAA after a large IRA withdrawal, Roth conversion, pension payment, or capital gain.
Medicare uses income brackets, so higher income can result in a higher surcharge. Most Medicare beneficiaries do not pay IRMAA, but for retirees with meaningful taxable income, it can become an important planning issue.
What Income Counts Toward IRMAA?
For IRMAA, Social Security generally looks at your adjusted gross income plus tax-exempt interest income. This is the version of modified adjusted gross income, or MAGI, used for IRMAA purposes.
That can include more than many retirees expect.
Common items that may affect IRMAA include:
Traditional IRA or 401(k) withdrawals
Roth conversions
Required minimum distributions
Taxable Social Security benefits
Pension income
Capital gains
Taxable interest and dividends
Business or rental income
Tax-exempt interest from municipal bonds
The municipal bond issue often surprises people. Municipal bond interest may be exempt from federal income tax, but tax-exempt interest can still be included when determining IRMAA.
How the Two-Year Lookback Works
IRMAA is generally based on your modified adjusted gross income from two years earlier because that is the most recent tax return Medicare usually has available when premiums are set.
For example, your 2026 Medicare premiums are typically based on your 2024 tax return. If you had unusually high income in 2024, that may affect your Medicare premiums in 2026.
The main exception is when your income has gone down because of certain life-changing events. Retirement, reduced work, divorce, and the death of a spouse are common examples. In those situations, you may be able to ask Social Security to use more recent income information.
This timing matters because retirement income can change quickly. A person might retire at 65 and have much lower income than they did while working, but Medicare may still be looking at a higher-income year from age 63 unless Social Security approves a new determination.
Why IRMAA Matters for Retirement Planning
IRMAA matters because it connects your tax decisions to your Medicare premiums.
A Roth conversion, for example, may be attractive because it can reduce future pre-tax IRA balances and create more tax-free income later. But the conversion also adds taxable income in the year it is completed. That higher income can increase Medicare premiums two years later.
The same issue can come up with capital gains, large IRA withdrawals, or required minimum distributions.
This doesn’t mean retirees should automatically avoid IRMAA. Sometimes paying a higher Medicare premium for a year or two may be reasonable if the broader planning benefit is worthwhile.
The issue is awareness. IRMAA is easier to plan around before the income is created.
A Practical Example
Suppose a married retired couple is considering a Roth conversion. Their income is close to the first IRMAA threshold.
If they convert too much in one year, they may move into a higher Medicare premium bracket two years later. That extra cost may not make the conversion a bad decision, but it should be part of the calculation.
In some cases, spreading conversions across multiple years may be more attractive than doing one large conversion. In other cases, a larger conversion may still make sense because of future tax rates, required minimum distributions, estate planning goals, or the surviving spouse’s future tax situation.
IRMAA should be viewed as one part of the planning picture, not the only factor.
IRMAA Can Matter More After One Spouse Dies
Married couples often plan around joint tax brackets and joint IRMAA thresholds. After the first spouse dies, the surviving spouse may eventually file as a single taxpayer.
That can create a meaningful shift.
The surviving spouse may have lower household income, but they also face lower IRMAA thresholds and narrower tax brackets. Required minimum distributions, pension income, Social Security, and investment income may continue, while the filing status changes.
This is one reason retirement tax planning often looks beyond the current year. A plan that looks reasonable for a married couple today may look different for the surviving spouse later.
Can IRMAA Be Appealed?
IRMAA may be reduced if your income has gone down because of a qualifying life-changing event.
Social Security’s Form SSA-44 is used to request a reduction in IRMAA after certain life-changing events. Examples include work stoppage, work reduction, marriage, divorce, death of a spouse, loss of income-producing property, loss of pension income, or certain employer settlement payments.
This can be especially relevant in the first few years after retirement. If Medicare is using an old high-income working year, but you have since retired and your income has dropped, it may be worth reviewing whether an appeal is appropriate.
An appeal is not the same thing as general tax planning. A voluntary Roth conversion or investment sale may increase income, but that does not necessarily qualify as a life-changing event that reduces income.
Common Mistakes
Thinking IRMAA Is a Tax
IRMAA feels like a tax because it is based on income, but it shows up as higher Medicare premiums.
That distinction matters because it may not appear in the same place as your income tax liability. Retirees can miss it if they only review the tax return and do not consider Medicare premiums.
Forgetting About Roth Conversions
Roth conversions can be useful in the right circumstances, but they increase taxable income in the year of the conversion.
If the conversion pushes income over an IRMAA threshold, the Medicare premium impact should be included in the analysis.
Ignoring the Two-Year Delay
The IRMAA impact does not usually show up right away. A high-income year can affect premiums two years later.
That delay makes it easy to miss the connection between a planning decision today and a Medicare premium increase later.
Trying to Avoid IRMAA at All Costs
Avoiding IRMAA is not always the best goal.
Sometimes a strategy that triggers IRMAA may still be worthwhile after considering taxes, future required minimum distributions, surviving spouse planning, and estate goals. The better goal is to make the decision intentionally.
Key Takeaways
IRMAA is an extra Medicare premium charge for higher-income beneficiaries.
It can apply to Medicare Part B and Medicare Part D.
IRMAA is generally based on modified adjusted gross income from two years earlier.
The two-year lookback exists because Medicare usually uses the most recent tax return available when setting premiums.
Roth conversions, IRA withdrawals, capital gains, required minimum distributions, and tax-exempt interest can all matter.
Part D IRMAA is separate from the prescription drug plan premium you pay to your insurance company.
Some retirees may be able to appeal IRMAA after a qualifying life-changing event that reduces income.
IRMAA should be part of retirement income and tax planning, especially for households with meaningful pre-tax retirement accounts.
FAQ
Is IRMAA based on gross income or taxable income?
IRMAA is based on modified adjusted gross income. For this purpose, Social Security generally looks at adjusted gross income plus tax-exempt interest income.
Why does Medicare use income from two years ago?
Medicare generally uses income from two years earlier because that is usually the most recent tax return available when premiums are determined. For example, 2026 premiums are typically based on 2024 income. If your income has dropped because of a qualifying life-changing event, you may be able to ask Social Security to use more recent income information.
Does IRMAA apply to Medicare Part A?
No. IRMAA applies to Medicare Part B and Medicare Part D. Most people do not pay a Medicare Part A premium if they have enough Medicare-covered work history.
Does a Roth conversion count toward IRMAA?
Yes, a Roth conversion can count toward IRMAA because the taxable conversion amount generally increases adjusted gross income. The Medicare premium effect usually appears two years later.
Can municipal bond income affect IRMAA?
Yes. Tax-exempt interest can be added back when calculating modified adjusted gross income for IRMAA purposes. That means municipal bond interest may still affect Medicare premium calculations.
Can IRMAA go away?
Yes, IRMAA can change from year to year as your income changes. If your income falls below the applicable threshold in a future year, the surcharge may no longer apply. You may also be able to request a reduction sooner if you have a qualifying life-changing event and your income has gone down.
How IronFjord Can Help
IronFjord Wealth Management helps individuals and families approaching or living in retirement coordinate decisions around Medicare and IRMAA planning, retirement income, investments, and taxes.
If you’re looking for help thinking through these decisions, you’re welcome to schedule a complimentary introductory call. We’ll learn more about your situation, explain how the firm works, and see whether we may be a good fit.
Disclaimer: This article is for educational and informational purposes only and should not be considered personalized investment, tax, or legal advice. While we strive to provide accurate and current information, the information in this article may not apply to your specific circumstances and should not be relied upon as a substitute for professional advice. Laws, rules, and interpretations can change. You should consult a qualified professional who understands your unique situation before making financial, tax, legal, or investment decisions.
