Is Your Tax Return Raising Your Medicare Premiums?
Medicare's annual enrollment period opens October 15 and runs through December 7. Most retirees use that window to compare drug plans and weigh Medicare Advantage options, and they should. But there's another Medicare cost that no plan comparison will fix, and it's hiding on your tax return.
It's called IRMAA, and it can quietly cost retirees thousands of dollars a year.
What Is IRMAA?
IRMAA stands for Income-Related Monthly Adjustment Amount. In plain terms, it's a surcharge that higher-income retirees pay on top of their standard Medicare Part B (medical Insurance) and Part D (Prescription drug) premiums.
This year, the standard Part B premium is $202.90 per month, up from $185.00 in 2025, while higher-income retirees pay between $284.10 and $689.90 monthly under IRMAA tiers. Part D adds its own layer: an extra $14.50 to $91 per month on top of your plan premium, depending on income.
For a married couple, both paying surcharges, that can easily add up to several thousand dollars a year, or more.
The Two-Year Lookback
Here's the part that catches people off guard. Medicare doesn't look at what you earn today. Your 2026 premiums are based on your 2024 income due to Medicare's two-year lookback rule.
That means the tax return you filed this spring (your 2025 income) is setting your 2027 premiums. And the income you're earning right now, in 2026, will set your premiums for 2028.
The good news? Unlike 2025, the 2026 tax year isn't over. There are still three months to shape it.
Why One Dollar Can Matter
Most of the tax code is progressive: cross into a higher bracket, and only the dollars above the line are taxed at the higher rate. IRMAA doesn't work that way. It works as a cliff system, meaning exceeding an income threshold by even $1 can trigger the full surcharge for the next tier.
The brackets begin at $109,000 for single filers and $218,000 for married couples filing jointly, and the surcharges step up from there. Landing $1 above a threshold instead of $1 below it can be expensive.
What Pushes Retirees Over the Line
IRMAA is based on modified adjusted gross income, which is your adjusted gross income plus any tax-exempt interest. Yes, even interest from municipal bonds counts. Many retirees cross IRMAA thresholds not because of lifestyle changes, but due to routine income events such as required minimum distributions, pension COLAs, or portfolio gains.
Other common triggers include Roth conversions, selling real estate, capital gains distribution, deferred compensation payouts, or a big one-time withdrawal from an IRA to fund a purchase.
None of these are bad decisions on their own. The problem is making them without seeing the Medicare impact first.
Five Ways to Manage IRMAA Before Year-End
- Run a projection now. Before making any year-end moves, consult your HCM Advisor to understand where your 2026 income is likely to land relative to the nearest threshold. This single step makes every other decision clearer.
- Size Roth conversions precisely. Conversions can be a smart long-term move, but the right amount is often "up to just below the next IRMAA tier," not a round number picked out of the air.
- Use Qualified Charitable Distributions. If you're 70½ or older and give to charity, sending gifts directly from your IRA keeps that money out of your income entirely and can satisfy your RMD at the same time.
- Be strategic with gains and withdrawals. Harvesting losses to offset gains, spreading large sales across two tax years, or drawing spending money from Roth or taxable accounts instead of an IRA can all help keep income in check.
- Appeal if your life has changed. If your income dropped because of retirement, a spouse's death, divorce, or a few other qualifying events, you could ask Social Security to use your more recent income instead by filing Form SSA-44. Many new retirees are still paying surcharges based on their final, highest-earning working years, and don't know if they can appeal.
Where Planning and Tax Meet
IRMAA is a perfect example of why we believe your financial plan and your tax strategy belong under one roof. An investment decision in November becomes a Medicare bill two years later. Seeing both sides at once is how you avoid unpleasant surprises.
If you're an HCM client, schedule your year-end review and we'll check where you stand. If you're not yet a client and you're approaching or already on Medicare, contact our Cincinnati office. We'd be glad to take a look.
A retirement well planned should include keeping more of what you've earned.