Medicare IRMAA Surcharges: The Income Cliff Two Years Back

A Roth conversion made in 2026 shows up on a Medicare bill in 2028. Few retirees see it coming, because the tax is paid in April and the surcharge arrives two years later, on a premium notice from the Social Security Administration, long after the decision that caused it.

What IRMAA is

The income-related monthly adjustment amount, IRMAA, is an extra charge on top of the standard Medicare Part B and Part D premiums. It applies when your modified adjusted gross income is above set thresholds. For IRMAA, that means adjusted gross income with any tax-exempt interest added back. The thresholds come in tiers, differ by filing status and change every year.

Everyone on Medicare pays a premium. Only people over the first threshold pay the adjustment, and each higher tier pays more. The Part D piece is collected by Medicare itself, on top of whatever your drug plan charges, so switching plans or choosing a cheaper one leaves the surcharge exactly where it was.

The two-year lag

Medicare uses the tax return from two years before. This year’s premium depends on the income you reported two years ago. If that return isn’t on file yet, the SSA can use the one from three years back and correct later.

The lag catches people at the start. Medicare begins at 65, so the first premiums are set by income at 63, and a 63-year-old who is still drawing a salary, or who takes a big bonus, sells a business or converts a large IRA to a Roth that year, can start Medicare paying a surcharge on income that no longer exists.

The cliff

IRMAA doesn’t phase in. Cross a threshold by one dollar and you pay that tier’s full surcharge, every month, for the whole year.

The threshold in that sum is invented for the arithmetic. The real tiers are published each year by Medicare and the SSA, with separate columns for single and joint filers. That’s where to check before you act. On a joint return with both spouses on Medicare, each of you pays the surcharge, so one dollar over costs double.

Asking for a new determination

Income two years back is sometimes the wrong measure. Suppose your life has changed since then. The SSA accepts Form SSA-44 for a list of life-changing events, including:

• stopping work or cutting back hours, which covers retirement
• marriage
• divorce or annulment
• a spouse’s death
• losing a pension or income-producing property

File it with evidence of the event and an estimate of your current income, and the SSA can base the premium on the newer, lower figure. It is the fix for the 63-year-old above, who retired at 64 and whose income has since dropped. It won’t help with a one-off choice like a Roth conversion or a large capital gain. Those count as income you decided to take.

Planning around the cliff

Large, lumpy income is where IRMAA bites. That means Roth conversions, capital gains from selling a property or a concentrated stock position, and big required minimum distributions in your seventies, all of which land on the same line of the return that Medicare reads.

These habits help:

1. Look up the current thresholds before any conversion or sale near year-end.
2. Size conversions and gains to stop just below a tier line, leaving a margin for the dividends and interest you can’t pin down until December.
3. Spread large gains across two tax years where you can.

Weigh the surcharge against what the income buys. A Roth conversion that pays one year of IRMAA can still be worth it if it shrinks a decade of RMDs, and the guide to choosing a Roth or traditional IRA covers the bracket side of that trade. Situations differ, and the retirement topic hub collects the related reading.

The best time to plan those conversions is the stretch of low-income years before RMDs, which is where the next lesson on filling low tax brackets before RMDs goes.