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Understanding IRMAA
Published Date : July 28, 2026
Many retirees are surprised to learn that Medicare premiums are not the same for everyone. Higher-income beneficiaries pay an additional surcharge known as the Income-Related Monthly Adjustment Amount (IRMAA). Since IRMAA can meaningfully increase healthcare costs in retirement, understanding how it works can potentially help retirees make more informed planning decisions.
What Is IRMAA?
IRMAA applies to Medicare Part B (medical insurance) and Part D (prescription drug coverage) for individuals whose income exceeds certain thresholds. The Social Security Administration determines whether IRMAA applies based on your Modified Adjusted Gross Income (MAGI) reported on your federal income tax return.
A key feature of IRMAA is that it uses a two-year lookback. For example, your 2026 Medicare premiums are generally based on your 2024 tax return.
The surcharge is calculated using a series of income brackets. As income rises above each threshold, monthly Medicare premiums increase. Because the surcharge applies to both spouses when filing jointly, crossing an IRMAA threshold can substantially increase annual healthcare expenses.
Why IRMAA Matters
For retirees living on investment income, required minimum distributions (RMDs) from retirement accounts, or realized capital gains, it is surprisingly easy to trigger a higher IRMAA bracket.
Unlike regular income taxes, IRMAA functions as a “cliff.” Exceeding an income threshold by even $1 can move you into the next premium tier, making careful income management especially valuable.
Strategies to Reduce IRMAA
1. Manage Retirement Account Withdrawals
Large withdrawals from traditional IRAs and 401(k) plans increase taxable income. In some cases, before the RMD (required minimum distribution) age, there may be a window to take extra distributions to spread out the tax burden and lower income in future years.
2. Roth Conversions
Converting traditional IRA assets to Roth before enrolling in Medicare can reduce the size of future RMDs. Although Roth conversions increase taxable income in the year of conversion, spreading them out may reduce IRMAA exposure later in retirement.
3. Use Tax-Efficient Sources of Cash
Coordinate withdrawals across account types to help keep income below important IRMAA thresholds.
4. Monitor Capital Gains
Selling appreciated investments may generate significant taxable gains. If possible, spread large sales over multiple tax years or harvest any available losses to offset gains.
5. Make Qualified Charitable Distributions (QCDs)
Individuals age 70½ or older may make Qualified Charitable Distributions directly from an IRA to eligible charities. Up to certain limits, QCDs can satisfy all or part of an annual RMD while excluding the distributed amount from taxable income, potentially reducing both income taxes and IRMAA.
6. Appeal After a Life-Changing Event
If income has fallen because of retirement, the death of a spouse, divorce, or certain other qualifying life events, Medicare beneficiaries may request that Social Security reconsider their IRMAA determination using more current income information.
The Importance of Advance Planning
While IRMAA cannot always be avoided (and sometimes it is short-sided to even try), thoughtful overall tax planning may help minimize its impact. We appreciate the opportunity to coordinate all these moving parts with our clients’ CPAs.
Sources: IRS, Michael Kitces, Wall Street Journal, New York Times
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