7 Ways to Plan Now to Save on Medicare IRMAA Surcharges Later

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The income-related monthly adjustment amount (IRMAA) is one of the most significant and stealthy retirement taxes, effectively raising the cost of Medicare Part B and Part D premiums for those with higher incomes. Since the penalty is based on your tax return from two years prior, effective IRMAA management requires a proactive, long-term strategy.

The IRMAA is one of the most significant costs retirees face and is a crucial part of retirement income planning. IRMAA is an extra charge added to your standard monthly premiums for Medicare Part B medical insurance and Medicare Part D prescription drug coverage.

Liability for the IRMAA is based on your modified adjusted gross income (MAGI) from your tax return two years prior to the current Medicare year. The lookback is necessary as that is the most recent tax return available when the brackets and surcharges are set.

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In 2026, the Part B surcharges will cost you anywhere from $81.20 to $487 monthly. Part D surcharges are lower and will range from $14.50 to $91 every month. This is in addition to the basic premiums. For 2026, the Part B premium is $202.90, and the Part D stand-alone premium is $46.50 on average.

The IRMAA is calculated on a sliding scale with five income brackets, topping out at $500,000 for individual filing and $750,000 for married, filing jointly. These figures, except the top bracket, are inflation-adjusted annually. For 2026, these inflation-adjusted brackets range from $109,000 to $205,000 for single tax filers and $218,000 to $410,000 for joint filers.

The MAGI calculation for IRMAA purposes is generally your adjusted gross Income (AGI) plus any tax-exempt interest income. This includes nearly all sources of money that appear as taxable income on your Form 1040.

Here's a breakdown of the types of income that trigger IRMAA and how to plan around them today to lock in lower health care costs in retirement.

Types of income that trigger IRMAA

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Many savvy retirees believe they've optimized their situation by holding municipal bonds or delaying retirement withdrawals, only to be hit with the costly IRMAA surcharge on their Medicare premiums. This penalty is triggered by your MAGI, a measure that captures typically tax-favored income such as tax-exempt interest and, critically, every dollar withdrawn from a traditional IRA or 401(k).

Let's examine the specific income sources that push beneficiaries into higher IRMAA brackets and outline the essential strategies necessary to control your MAGI and protect your retirement budget.

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Major sources of retirement and investment income
Income Type	Why It Counts	Planning Note
Traditional IRA/401(k) distributions	The full amount withdrawn is considered ordinary taxable income. This includes required minimum distributions (RMDs) after age 73 or 75, depending on when RMDs begin.	This is the biggest trigger for most retirees. Planning withdrawals is essential.
Taxable Social Security benefits	The taxable portion of your Social Security benefit (up to 85%) is included in AGI.	Delaying Social Security can keep your MAGI low in early retirement years, creating "tax-free space."
Capital gains	Profits realized from the sale of stocks, mutual funds, real estate or other assets are included.	The timing of major asset sales (a business or second home) must be carefully planned.
Interest and dividends	Taxable interest from CDs, savings accounts, bonds, and most ordinary dividends from investments are included.	Holding interest-heavy investments in tax-advantaged accounts (such as Roth IRAs/Roth 401(k)s) can help.
Roth conversions	The amount you convert from a traditional IRA/401(k) to a Roth IRA is treated as taxable income in the year of the conversion.	A large conversion can easily push you into a higher IRMAA bracket two years later.
Pension payments	The taxable portion of pension income or annuities is included.	This income is often fixed and harder to manage than investment withdrawals.
Tax-exempt interest	This is the key add-back: Interest from municipal bonds is not taxable for income tax purposes, but it must be added back to your AGI to calculate MAGI for IRMAA.	High-net-worth retirees with large municipal bond holdings are often surprised by this trigger.

The core of the IRMAA MAGI calculation

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IRMAA MAGI = AGI + tax-exempt interest. In short, the IRMAA-specific MAGI is primarily your AGI (Form 1040, Line 11) plus your tax-exempt interest (Form 1040, Line 2a).

These are the specific types of tax-exempt interest and dividends that are generally added back:

Interest from municipal bonds. This is the most common form of tax-exempt interest. The interest from state and local government obligations (municipal bonds) is typically exempt from federal income tax, but it must be added back to your AGI to calculate your IRMAA MAGI.
Tax-exempt dividends. If you hold a mutual fund or exchange-traded fund (ETF) that invests in municipal bonds, the dividends they pay you might be classified as tax-exempt. These dividends, to the extent they're derived from tax-exempt interest, are also included.
Interest from U.S. savings bonds. Interest from certain U.S. savings bonds (Series EE or I) that's excluded from your taxable income because it was used for qualified higher education expenses is also added back.

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7 planning strategies to manage or avoid IRMAA, worth up to almost $14,000

This is a crucial area of retirement planning. In 2026, the maximum IRMAA surcharge can increase your Medicare expenses by $6,936 annually. For couples, that amount doubles to $13,872. Those figures include $5,844/$11,688 for Part B and $1,092/$2.184 for Part D for individuals and couples, respectively.

The goal is to manage your taxable income in the Medicare look-back years, typically ages 63 and 64, for a Medicare Part B start at 65.

Here are seven income planning tactics to manage your MAGI and mitigate IRMAA:

1. Maximize tax-free income sources. This is the most powerful strategy because this income does not count toward your MAGI.

Qualified withdrawals from Roth accounts are tax-free and don't increase your MAGI. HSA withdrawals used for qualified medical expenses, including Medicare premiums, are tax-free and do not increase your MAGI.

2. Strategic Roth conversions. The Goal: Convert pre-tax money, which counts toward MAGI, to Roth money, which does not, during low-income years. Those are the years before RMDs start and before taking Social Security.

You can choose to make a single big conversion or use a partial conversion schedule. Partial conversions only convert enough each year to stay below the first IRMAA threshold (or any subsequent threshold), limit current income taxes and don't drain your cash reserves. This is a multi-year strategy.

3. Optimize your retirement account withdrawals: the 'Roth Strategy'

Since withdrawals from Traditional IRAs, 401(k)s, and RMDs are generally included in MAGI, while qualified Roth withdrawals are not, strategic use of Roth accounts is the most powerful tool retirees and soon-to-be retirees have at their disposal.

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Tactic	Mechanism	IRMAA Impact
Strategic Roth conversions	Convert a portion of your traditional IRA/401(k) to a Roth IRA before you start Medicare or during years of low income in early retirement.	Increases MAGI now (in the year of conversion), but permanently lowers MAGI later (in retirement), minimizing future IRMAA risk. Spreading conversions over several years prevents a single, large conversion from pushing you into a high IRMAA bracket.
Balance withdrawals from your various accounts	In retirement, balance your annual income draw by strategically pulling money from three buckets: 1) taxable brokerage accounts, 2) tax-deferred accounts (traditional IRA/40l(k)), and 3) tax-free accounts (Roth/Health Savings Account).	Use Roth and HSA funds to fill any gap needed to keep your MAGI below the next IRMAA threshold, giving you tax-free income instead of taxable income.
Max out tax-deductible contributions (if working)	If you're still working, maximize pre-tax contributions to traditional 401(k)s, 403(b)s, and IRAs.	Contributions are a direct adjustment to gross income, reducing your MAGI in the current year, which lowers your IRMAA calculation two years later.

Tactic

Mechanism

IRMAA Impact

Strategic Roth conversions

Convert a portion of your traditional IRA/401(k) to a Roth IRA before you start Medicare or during years of low income in early retirement.

Increases MAGI now (in the year of conversion), but permanently lowers MAGI later (in retirement), minimizing future IRMAA risk. Spreading conversions over several years prevents a single, large conversion

from pushing you into a high IRMAA

bracket.

Balance withdrawals from your various accounts

In retirement, balance your annual income draw by strategically pulling money from three buckets: 1) taxable brokerage accounts, 2) tax-deferred accounts (traditional IRA/40l(k)), and 3) tax-free accounts (Roth/Health Savings Account).

Use Roth and HSA funds to fill any gap needed to keep your MAGI below the next IRMAA threshold, giving you tax-free income instead of taxable income.

Max out tax-deductible contributions (if working)

If you're still working, maximize pre-tax contributions to traditional 401(k)s, 403(b)s, and IRAs.

Contributions are a direct adjustment to gross income, reducing your MAGI in the current year, which lowers your IRMAA calculation two years later.

4. Utilize a qualified charitable distributions (QCDs)

This is a powerful tool for charitable retirees age 70 1/2 and older. In 2025, a qualified charitable distribution (QCD) allows you to distribute up to $108,000 for individuals or $216,000 for married couples that file jointly, directly from your traditional IRA to an eligible charity. The limits rise to $111,000 and $222,000, respectively, in 2026.

IRMAA impact, The QCD is excluded from your MAGI, helping to reduce your taxable income. Since the RMD is satisfied without the money being included in your taxable income (MAGI), it directly reduces the income that is used to calculate the IRMAA.

Planning reminder, A standard cash charitable deduction doesn't reduce your MAGI for IRMAA purposes.

5. Manage investment income

Investment activities can create unexpected income spikes that trigger IRMAA. While selling an asset might sometimes be necessary, there are ways to minimize the spike and reduce your exposure to IRMAA.

Avoid large capital gains spikes. Be strategic about selling highly appreciated assets. Realizing a large capital gain, such as selling a large block of stock or a piece of property, can easily push your MAGI above an IRMAA threshold for two years.

Tax-loss harvesting. Sell underperforming investments to offset capital gains you've realized. Net capital losses of up to $3,000 (or $1,500 if married, filing separately) can offset other ordinary income, thereby reducing your MAGI.

Asset location. Place investments that generate significant taxable income (such as actively managed mutual funds, corporate bonds or high-dividend stocks) inside tax-deferred accounts (401(k), traditional IRA) to shield the income from the MAGI calculation.

6. Time and structure your income

Defer or accelerate income, known as the "Income Lumping" Strategy

Lump income in one year. If you know you're going to jump into a higher IRMAA bracket anyway (due to a large bonus, final year of work, or a necessary home sale), you might choose to accelerate other taxable income, such as a partial Roth conversion or cashing in savings bonds, into that same high-income year.

Why it works. This allows you to "take the IRMAA hit" for only one two-year period, instead of spreading a slightly smaller income over multiple years and potentially paying the surcharge for four or six years.

7. File an appeal

If your income suddenly drops due to a "life-changing event," you don't have to wait two years for an adjustment to your IRMAA. You can file an appeal with the Social Security Administration (SSA) using Form SSA-44 (PDF) (Medicare Income-Related Monthly Adjustment Amount — Life-Changing Event).

If you have questions or need help, call the SSA (1-800-772-1213) and be sure to tell the representative you want to lower your Medicare IRMAA due to a life-changing event.

Qualifying life-changing events include:

Work stoppage or reduction; you or your spouse retired or reduced work hours
Marriage, divorce or death of a spouse
Loss of income-producing property
Loss or reduction of certain pension income

Planning is the only way to fight the IRMAA surcharges

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For most retirees, the monthly Medicare premium is a fixed cost, but for a growing number of high-income beneficiaries, a steep penalty known as the IRMAA dramatically increases that bill.

This surcharge is triggered not just by earnings from work, but by a specific measure of income from two years ago — a measure that includes everything from traditional retirement account withdrawals to municipal bond interest.

The core strategy for avoiding or reducing IRMAA is to lower your Modified Adjusted Gross Income (MAGI) in the relevant year, which is typically two years prior to the year you pay the premium. Understanding exactly which income sources comprise your MAGI is an essential step toward strategically planning your withdrawals to avoid the IRMAA altogether or being pushed into the next, more expensive IRMAA tier.

Remember, it only takes earning $1 over the threshold to trigger the surcharge.

Donna joined Kiplinger as a personal finance writer in 2023. She spent more than a decade as the contributing editor of J.K.Lasser's Your Income Tax Guide and edited state specific legal treatises at ALM Media. She has shared her expertise as a guest on Bloomberg, CNN, Fox, NPR, CNBC and many other media outlets around the nation. She is a graduate of Brooklyn Law School and the University at Buffalo.