IRMAA, Explained: The Medicare Surcharge That Sneaks Up

What is IRMAA and who has to pay it?

Everyone on Medicare Part B pays a standard monthly premium, and everyone with drug coverage pays a Part D plan premium. IRMAA is the extra layer on top. If your income two years ago crossed a federal threshold, Social Security adds an income-related monthly adjustment amount to both premiums. It is not a tax on your return. It arrives as a bigger deduction from your Social Security check, or as a direct bill if you are not collecting benefits yet.

There are five surcharge tiers above the base thresholds, each adding more to your monthly cost. For 2026, the first tier starts above $109,000 of income for a single filer and $218,000 for a couple filing jointly, and the top tier applies at $500,000 and $750,000. These are dated federal figures that adjust over time, so always check the current year before making decisions.

Two details catch people off guard. IRMAA applies per person, so a married couple both on Medicare each pay their own surcharge. And a Medicare Advantage plan does not sidestep it; the adjustment follows your Part B and drug coverage wherever they live.

How does the two-year lookback work?

Social Security cannot see this year's income, so it uses the most recent tax return the IRS has on file, which is generally the return from two years ago. Your 2026 premiums are set by your 2024 income. Your 2027 premiums will be set by your 2025 income. The measuring stick is modified adjusted gross income, which for IRMAA means your adjusted gross income plus any tax-exempt interest you earned.

The lookback is exactly why IRMAA sneaks up on new retirees. The income that sets your first Medicare premium at 65 is the income you earned at 63, often your highest-earning year ever, sometimes padded with severance or deferred compensation. You feel retired; the formula still sees a working salary. The same lag runs all through retirement: a large withdrawal, a Roth conversion, or a one-time gain echoes into your premiums two years later. Our guide to the retirement tax picture puts this timing problem in its larger context.

The good news is that IRMAA is recalculated every single year with a fresh return. A one-year income spike buys one year of higher premiums, not a permanent penalty.

What income counts toward IRMAA?

Almost everything on the front of your tax return counts, plus one item that surprises nearly everyone: tax-exempt municipal bond interest gets added back for this calculation even though the IRS does not tax it. Here is how the common retirement income sources land.

Summarized from Social Security and IRS guidance in effect for 2026. Your own return controls. Consult a licensed tax advisor about your numbers.

Why do people call IRMAA a cliff?

Because the tiers have no ramp. Ordinary tax brackets are gentle: only the dollars above a line get taxed at the higher rate. IRMAA is all or nothing. Land one dollar above a threshold and your entire year of premiums is charged at the higher tier. There is no partial credit for being close, and no proration for crossing the line in December instead of January.

That cliff shape makes timing worth understanding, especially in the years around 65. A withdrawal that could come from a pre-tax account or a Roth account, a conversion that could be split across two years, a gain realized in December or January: choices like these decide which side of a threshold your return lands on. This only matters when your income sits near a line. Comfortably inside a tier, the right move is usually to do nothing.

How do annuities and withdrawal choices interact with IRMAA?

Since this site is about annuities, honesty requires both sides of this story.

Where deferral genuinely helps the timing. Money growing inside a deferred annuity is tax-deferred, never tax-free, and while it stays inside the contract it adds nothing to the income that sets IRMAA. A retiree drawing on other sources can leave that growth uncounted for years. If you fund a contract with after-tax dollars and later annuitize it, part of each payment returns your own principal untaxed until your basis is used up, so only the gain portion of each payment lands in the calculation. Spreading the taxable gain across many years of payments can keep any single year below a threshold that one lump-sum withdrawal might vault right over. How those payments are engineered is covered in our guide to guaranteed lifetime income.

Where the same feature bites back. Deferral is a timing tool, not an eraser. Gains come out of a deferred annuity first and are taxed as ordinary income, so a big withdrawal year can push your premiums up two years later. And inside an IRA, required minimum distributions eventually force pre-tax money out whether you need it or not. One narrow exception: a QLAC excludes the dollars you move into it from the RMD calculation until its income begins, which can hold countable income down during the deferral years. Our post on what a QLAC is walks through that trade honestly.

The caution that matters most. Never buy an annuity primarily to manage a Medicare premium. IRMAA is real money, but it is recalculated every year, and it is almost always smaller than the cost of committing savings to a contract that was never the right fit. An annuity earns its place by solving an income problem, as our pillar guide to what an annuity is explains; a premium surcharge is a tiebreaker at best. If you are weighing one, start with is an annuity right for me before any tax angle enters the conversation.

Any annuity guarantee is backed by the claims-paying ability of the issuing insurer; it is not FDIC-insured or bank-guaranteed. Withdrawals before age 59½ may incur a 10% federal penalty, and surrender charges may apply.

Can you appeal an IRMAA decision?

Yes, and the appeal that matters most is the one new retirees are entitled to. Social Security will recalculate your IRMAA using a more recent estimate of income if you have had a life-changing event. The list includes stopping or reducing work, marriage, divorce or annulment, the death of a spouse, the loss of income-producing property beyond your control, the loss of pension income, and an employer settlement payment.

Retirement is the classic case. If your premium at 65 is being set by the salary you earned at 63, and you have now stopped working, file form SSA-44 with your estimate of this year's lower income and documentation of the work stoppage. Social Security can then use the new figure instead of the stale one. If the tax data itself is wrong or you amended a return, you can also ask for a new determination on those grounds.

What does not qualify is simply having a one-time spike, such as a home sale or a large conversion, with no listed event behind it. Those years resolve on their own when the next return rolls in.

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