How Income Affects Your Medicare Costs

Here’s something that catches people completely off guard every single year: a letter from Social Security in the fall, telling them their Medicare premiums are going up, sometimes by hundreds of dollars a month. No warning. No obvious reason. Just a higher number, effective January 1st.

That letter is about IRMAA, the Income-Related Monthly Adjustment Amount, and I’ve watched it blindside otherwise financially savvy retirees more times than I can count. The couple who sold a rental property in 2024. The woman who did a large Roth conversion the year she retired. The man whose wife passed away, changing their filing status from married to single, which cut the income thresholds almost in half. Every one of them ended up paying significantly more for Medicare Part B and Part D in a subsequent year, and most of them had no idea it was coming.

So let’s get into what IRMAA actually is, what the 2026 numbers look like, and, more importantly, what you can do about it before it hits you.

What IRMAA Actually Is (and Why It Works the Way It Does)

IRMAA is a surcharge piled on top of your standard Medicare Part B and Part D premiums if your income crosses certain thresholds. It’s structured as a tiered pricing system where higher earners pick up a bigger share of their own Medicare costs.

The standard Medicare Part B premium for 2025 is $185.00 a month. Once IRMAA applies, you’re paying more. Sometimes a lot more. The surcharge jumps between tiers can be steep.

Here’s where it gets confusing: Social Security uses your tax return from two years prior to determine whether IRMAA applies. For 2026, that’s your 2024 Modified Adjusted Gross Income (MAGI). MAGI for IRMAA purposes is your Adjusted Gross Income plus any tax-exempt interest you earned. Cross that threshold in 2024 and you’ll get the letter in late fall 2025. The higher premium kicks in January 2026.

This two-year lookback causes most of the problems I see. You file your 2024 taxes in spring 2025. Social Security pulls that data. By the time you actually get the IRMAA notice, you’re already well into the year with little time to react. That’s why looking at your income two years out matters so much.

The 2026 IRMAA Brackets: What to Expect

The official 2026 IRMAA brackets won’t be finalized until the Centers for Medicare and Medicaid Services announces them in the fall of 2025, right around when Social Security mails those notices. But we can make a solid estimate based on how the brackets have shifted in recent years and the inflation adjustments that typically apply.

For reference, here are the confirmed 2025 IRMAA thresholds. These are what we’re starting from when projecting 2026.

For individuals filing individually in 2025:

• Income up to $106,000: Standard premium, no IRMAA
• $106,001 to $133,000: Part B surcharge of $74.00/month
• $133,001 to $167,000: $185.00/month surcharge
• $167,001 to $200,000: $295.90/month surcharge
• $200,001 to $500,000: $406.90/month surcharge
• Above $500,000: $443.90/month surcharge

Married couples filing jointly get thresholds roughly doubled at most tiers. Anyone married but filing separately faces extremely punishing thresholds, dropping to just $106,000 for the highest surcharge tier. That filing status issue alone deserves a conversation with a tax advisor.

Part D carries its own IRMAA surcharge too, ranging from about $13.70 to $85.80 per month on top of your plan’s regular premium in 2025, depending on your income tier.

For 2026, projections based on CPI-U adjustments suggest the bottom threshold for individuals could hit somewhere around $108,000 to $110,000. That’s an estimate. Check Medicare.gov once CMS publishes the official 2026 numbers. The percentage jumps between tiers tend to stay fairly stable even as the dollar amounts shift.

The Life Events Loophole Most People Don’t Use

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Here’s what most people don’t realize: you can appeal an IRMAA determination, and you can win.

If your income dropped significantly between the year Social Security is looking at (2024, for 2026 IRMAA) and now, you can file a Life Changing Event appeal using SSA Form SSA-44. Qualifying events include retirement or reduced work hours, marriage, divorce or annulment, death of a spouse, loss of income from property, and reduction of certain employer-sponsored pension income.

This is genuinely powerful. I’ve seen people drop two or three IRMAA brackets after filing SSA-44 because they retired in 2025 and their income fell substantially from 2024 levels. The appeal uses your estimated current-year income rather than the two-year-old tax return, so if you’re actually living on less money right now, you can potentially get the surcharge reduced or wiped out entirely.

The form itself isn’t complicated, but it does require documentation. You’ll need proof of the qualifying event (a retirement letter, a death certificate, final pay stubs) and an estimate of your current year’s income. Call 1-800-772-1213 and request an appointment with your local Social Security office.

One honest caveat: Social Security will reconcile this against your actual tax return later. If your income ends up higher than your estimate, they’ll come back and charge the difference. Be thoughtful about your estimate.

The Roth Conversion Problem Nobody Talks About

If you’re doing Roth conversions, please read this section carefully.

Roth conversions are a popular tax strategy. You move money from a Traditional IRA to a Roth IRA, pay income tax on the amount converted now, and enjoy tax-free withdrawals later. The long-term math often works beautifully. But Roth conversions spike your MAGI in the conversion year, which means they can shove you into a higher IRMAA bracket two years later.

A $50,000 Roth conversion adds $50,000 to your MAGI. Depending on where you started, that might push you from one IRMAA tier to the next. That could mean an extra $100 or more per month in Medicare premiums for the following calendar year. Over twelve months, that’s potentially $1,200 or more in added Medicare costs that never showed up in your conversion math.

This doesn’t mean Roth conversions are bad. For many people they’re excellent planning. But your advisor (and if you’re doing large Roth conversions without a fee-only financial advisor reviewing your full picture, go find one) should run the IRMAA numbers as part of the conversion analysis. I’ve seen conversion strategies thoughtfully capped at a specific dollar amount precisely to stay under an IRMAA threshold. That’s exactly the right approach.

Social Security Benefits and IRMAA: the Withholding Piece

If you’re collecting Social Security benefits, Medicare withholds your Part B premium directly from your benefit check. When IRMAA applies, that larger amount gets withheld automatically. You don’t get a separate bill in most cases; your net benefit just shrinks.

This matters for cash flow planning. If you’re expecting a specific monthly benefit and IRMAA hits at a higher tier, your take-home from Social Security could be meaningfully lower than you planned. Especially in the first year of retirement when people are recalibrating their spending, that gap can cause real stress.

The State Health Insurance Assistance Program (SHIP) offers free one-on-one Medicare counseling in every state. They can walk you through exactly what you’ll owe and help you decode those Social Security notices. I recommend SHIP counselors regularly. They’re not selling anything.

Practical Steps Before 2026 Arrives

Right now, if you’re reading this before October 2025, pull up your 2024 tax return and find your MAGI.

If you’re close to an IRMAA threshold or modestly over it, it’s worth talking to a CPA or financial planner about whether any 2024 income was a one-time event (a property sale, a distribution, an inheritance) versus recurring income. If it was one-time and your income is lower in 2025, that’s potentially grounds for an SSA-44 appeal once you receive your 2026 IRMAA notice.

AARP’s Medicare resource center has a solid overview of IRMAA that gets regularly updated. It’s a good place to double-check threshold numbers as the official 2026 figures get released.

If you’re still working or have some control over income timing, consider whether you can defer income or accelerate deductions to stay under a threshold in 2024. That window has closed if you’re reading this in 2025, but it’s a useful reminder that two years out is the relevant planning horizon for Medicare premiums.

The two-year lookback makes IRMAA feel like you’re always reacting, never getting ahead. But once you understand the structure, you have more control than it seems. Get your 2024 MAGI in front of you. Know the thresholds. And if that letter arrives in the fall, don’t just accept the number on the page.

This article is for informational purposes only. Medicare rules change annually. Always verify current plan details at Medicare.gov or by calling 1-800-MEDICARE (1-800-633-4227). This site does not sell insurance or recommend specific plans.

Sources

• State Health Insurance Assistance Program (SHIP)
• AARP’s Medicare resource center
• iHealth Track Wireless Blood Pressure Monitor
• Medicare and You 2024 Official Handbook (Amazon)
• Yes4All Wooden Balance Board for Seniors

Disclosure: As an Amazon Associate, we earn a small commission from qualifying purchases at no extra cost to you. We only recommend products that genuinely support the topics covered in this article.

• Medicare For Dummies (~$22), The definitive consumer guide to Medicare, enrollment windows, Part A/B/C/D, and supplement plans.
• Get What’s Yours for Medicare (~$17), Maximize your Medicare benefits and minimize out-of-pocket costs. Covers Part D drug coverage gaps and Medigap in depth.

Recommended Resources

Disclosure: As an Amazon Associate, we earn a small commission from qualifying purchases at no extra cost to you. We only recommend products that genuinely support the topics covered in this article.

• Medicare For Dummies (~$22), The definitive consumer guide to Medicare, enrollment windows, Part A/B/C/D, and supplement plans.
• Get What’s Yours for Medicare (~$17), Maximize your Medicare benefits and minimize out-of-pocket costs. Covers Part D drug coverage gaps and Medigap in depth.