Most people learn about IRMAA the same way: a letter arrives from the Social Security Administration explaining that next year’s Medicare premium will be several hundred dollars a month higher than the number they had budgeted for. The letter cites a tax return from two years ago. The income on that return has usually already been spent.
IRMAA stands for income-related monthly adjustment amount, and it is a surcharge added to Medicare Part B and Part D premiums for beneficiaries above certain income thresholds. It is not a tax, it is not means-tested in the way Medicaid is, and it is not permanent. But it is calculated on a delay, it works as a cliff rather than a slope, and it catches a lot of people who did nothing wrong except have one unusually good year.
How the two-year lookback works
Medicare sets your premium surcharge using your modified adjusted gross income from two years earlier. Your 2026 premiums are based on the tax return you filed in 2025 covering the 2024 tax year. Your 2027 premiums will be based on your 2025 return.
The reason is mundane. Social Security determines the following year’s IRMAA in the fourth quarter, and the most recent complete income data the IRS can hand over at that point is from two years back. There’s no discretion involved and no one at Medicare is evaluating your circumstances.
What this creates is a gap between when income shows up and when it costs you. Someone who retired in 2025 after a final year of full salary, a payout of accrued vacation, and a deferred compensation distribution may be living on a much smaller fixed income in 2027 while paying premiums priced off that final big year.
The 2026 numbers
The standard Part B premium in 2026 is $202.90 a month, up from $185.00 in 2025. That’s what you pay if your income sits below the first threshold.
Above it, surcharges apply in five tiers. The first threshold is $109,000 for single filers and $218,000 for married couples filing jointly. Cross it and the Part B surcharge is $81.20 a month, bringing the total to $284.10. The tiers climb from there: $202.90 in surcharge at the next level, then $324.60, then $446.30, and finally $487.00 for single filers at or above $500,000 and joint filers at or above $750,000. At the top tier the monthly Part B premium is $689.90.
Part D has its own surcharge running alongside, from $14.50 a month at the first tier to $91.00 at the top. That amount is added regardless of what your specific drug plan charges, and the 2026 average standalone Part D premium is about $34.50 before any surcharge.
The first four income brackets adjust for inflation each year based on the change in average CPI-U through the previous August. The top bracket has been frozen since it was created and is not scheduled to start adjusting until 2028, which means inflation slowly pushes more people into it.
Married couples who file separately face a much harsher schedule. Rather than five tiers, they get essentially two, and income above $109,000 jumps straight to the $446.30 surcharge level. Filing separately to manage IRMAA almost always backfires.
A dollar over the line costs about $1,148
The word to focus on is cliff. IRMAA is not phased in. There is no partial surcharge for being barely over a threshold. A joint filer with modified AGI of $218,000 pays the standard premium. A joint filer at $218,001 pays the first-tier surcharge on both Part B and Part D.
Run that out. The first-tier surcharge is $81.20 for Part B plus $14.50 for Part D, or $95.70 a month. Over twelve months that’s $1,148.40 per person. If both spouses are on Medicare, that single dollar of extra income costs the household about $2,297 for the year.
This is why the last few thousand dollars of income in a year matters far more to a Medicare-eligible household than the marginal tax rate alone would suggest. A Roth conversion, a capital gain, or a large required minimum distribution that nudges you across a line carries a cost that doesn’t show up anywhere on your tax return.
What counts as income, including the add-back that surprises people
The figure Medicare uses is your adjusted gross income from Form 1040 line 11, plus your tax-exempt interest from line 2a.
That AGI piece includes about what you’d expect: wages, the taxable portion of Social Security benefits, interest and dividends, capital gains, distributions from traditional IRAs and 401(k) plans, Roth conversion amounts, pension and annuity income, rental income, and business income.
The add-back is where people get caught. Tax-exempt interest counts for IRMAA purposes even though it doesn’t count for income tax purposes. Municipal bond interest, tax-exempt dividends, and savings bond interest excluded because it paid for qualified education expenses all get added back in. A retiree holding a large municipal bond position can look comfortably under the threshold on their 1040 and still land in a surcharge tier.
Qualified withdrawals from a Roth IRA do not count, and neither do distributions from a health savings account used for medical expenses. That asymmetry is the main reason Roth balances become more valuable once someone is within a couple of years of Medicare eligibility. The Social Security Administration publishes the current thresholds and explains how the determination is made.
When you can get a surcharge reversed
You are not stuck waiting two years for your income to catch up with reality. If your income dropped because of a specific life event, you can ask Social Security to use a more recent year instead. The form is SSA-44, titled Medicare Income-Related Monthly Adjustment Amount, Life-Changing Event.
The qualifying events are a defined list: marriage, divorce or annulment, death of a spouse, work stoppage, work reduction, loss of income-producing property, loss of pension income, and receipt of an employer settlement payment because of bankruptcy or closure.
Retirement counts, because it falls under work stoppage. That’s the most common successful appeal, and anyone retiring should expect to file one. What does not count is nearly as important: selling a house, doing a Roth conversion, taking a large capital gain, or receiving an inheritance are not life-changing events under this rule, even though they can all push you into a surcharge tier. If a one-time transaction caused the spike, you pay the surcharge for that one year and it falls off the following year once the income does.
Paying it, and planning around it
The Part B surcharge is folded into your Part B premium and comes out of your Social Security check automatically. Part D IRMAA works differently and often confuses people the first year: Medicare bills you for it directly, separately from whatever you pay your drug plan. You owe it even if an employer or retirement system covers your Part D plan premium. You can pay through your Medicare account online, your bank’s bill pay, or Medicare Easy Pay, which the Medicare website walks through.
The planning implication is a timing one. Because the surcharge looks at income two years back, the years that matter most are the ones before you enroll and the early retirement years when income is often at its lowest. Spreading a Roth conversion across several smaller years instead of one large one, watching where a property sale lands in the calendar, and using qualified charitable distributions to offset required minimum distributions are all ways to manage which bracket you land in.
None of it requires exotic strategy. It mostly requires knowing the thresholds before December rather than after, and checking your projected modified AGI against them the same way you’d check whether you’ve maxed out a retirement account. The Kiplinger IRMAA guide keeps a current table of the brackets if you want to check your own numbers against them.