IRMAA, Explained: Medicare's Two-Year Lookback and Its All-or-Nothing Cliffs

Most Medicare enrollees pay the standard Part B premium — $202.90 a month in 2026. But above certain income levels, an income-related monthly adjustment amount (IRMAA) gets added to both Part B and Part D premiums. Two design choices make it the surcharge that blindsides otherwise careful planners.

Quirk one: the two-year lookback

Your 2026 premiums are set by your 2024 tax return — specifically your modified adjusted gross income (AGI plus tax-exempt interest). Social Security simply uses the most recent return the IRS has fully processed.

The planning consequence: income you realize today echoes into premiums two years from now. The year you sell a rental property, take a large 401(k) distribution, or do a big Roth conversion plants a flag that Medicare salutes 24 months later — often after you've forgotten the transaction. And it means your final working years follow you into your first Medicare years.

Quirk two: cliffs, not slopes

IRMAA has no phase-in. Cross a threshold by one dollar and you pay the entire tier's surcharge — for the full year, for Part B and Part D, and per person (a married couple pays it twice).

For 2026, the first cliff sits at $109,000 single / $218,000 joint MAGI. Cross it and Part B goes from $202.90 to $284.10 per person per month; with the Part D surcharge, a couple pays roughly $2,300 more per year for crossing by a dollar. Five more tiers follow, topping out near $690 per person per month for Part B alone.

This is why year-end tax moves near a threshold deserve a premium check. The IRMAA estimator shows your tier and — more usefully — your headroom: how much more income fits before the next cliff.

What counts toward MAGI

Almost everything: wages, interest (including tax-exempt interest — the "M" in MAGI), dividends, capital gains, IRA and 401(k) withdrawals, Roth conversions, pension income, and the taxable share of Social Security.

What doesn't: qualified withdrawals from Roth accounts, QCDs (charitable gifts made directly from an IRA), HSA withdrawals for medical costs, and loan proceeds like a reverse mortgage. The pattern is worth noticing — retirees with money in different tax buckets can often choose their MAGI year by year, which is precisely why Roth conversions before 63 (when the lookback starts mattering) show up in so many plans.

The appeal most people don't know exists

The lookback assumes your income two years ago resembles your income now. Retire, and it usually doesn't. Social Security recognizes a list of life-changing events — work stoppage or reduction, marriage, divorce, death of a spouse, and a few others — that let you file form SSA-44 and ask for premiums based on your current, lower income instead.

This is the standard play for new retirees hit with IRMAA from their final working years: file the form with retirement documentation, skip the surcharge. It routinely saves thousands, and the number of people who simply pay because they didn't know to ask is depressing.

One thing that does not qualify: a one-time income spike like a Roth conversion or property sale. Those premiums arrive on schedule — the appeal is for changed circumstances, not regretted transactions.

The takeaway

IRMAA isn't a reason to avoid income — a surcharge is a fraction of the income triggering it. It's a reason to time income deliberately: know your headroom, keep conversions and sales inside tiers where you can, and appeal when retirement genuinely changed your picture.