With the tax filing deadline one week away, many taxpayers are focused on what they owe the IRS. But for retirees, the income reported on that return may also determine whether their Medicare premiums jump dramatically as well.
Most people have a general understanding of income tax brackets and know they must be careful not to report so much income that it pushes them into a higher bracket. However, there is another less well-known set of income thresholds that can be just as important: the IRMAA brackets that determine Medicare premiums. IRMAA, short for Income-Related Monthly Adjustment Amount, is a surcharge applied to Medicare Part B and Part D premiums for higher-income retirees.
Unlike federal tax brackets, which phase in gradually, IRMAA thresholds operate more like cliffs. Even a small increase in a retiree’s income can lead to significantly higher healthcare costs. For 2026, IRMAA begins when income exceeds $106,000 for single filers and $212,000 for married couples filing jointly. Crossing these thresholds can raise Medicare premiums by as much as $500 per month per enrollee.
Over the course of retirement, these additional costs can add up to a substantial amount, making it important for retirees to manage their income carefully. Because IRMAA is based on Modified Adjusted Gross Income, large withdrawals from traditional IRAs, significant capital gains, or other spikes in taxable income can unexpectedly push retirees into higher premium tiers. Thoughtful planning around the timing of withdrawals, realizing gains, and the management of income sources can often keep your Medicare premiums below these breakpoints.
Another helpful strategy is to rely more on funds that do not increase the taxable income used to calculate IRMAA. For example, qualified charitable distributions from an IRA after age 70½ allow retirees to satisfy required minimum distributions while keeping that amount out of taxable income. Withdrawals from Roth IRAs or health savings accounts generally do not count toward the income levels that trigger IRMAA, which can help retirees manage their reported income more effectively.
While most people only start thinking about these matters at retirement, some of the most valuable planning opportunities occur before a person even qualifies for Medicare. Gradually converting traditional IRA assets to Roth accounts can reduce future required minimum distributions and help keep taxable income lower later in retirement. While Roth conversions create income in the year they occur, they may help retirees avoid higher IRMAA premiums in the future.
In the end, IRMAA is another reminder that retirement planning is about more than investment returns. Overlooking these Medicare thresholds can quietly add thousands of dollars in additional costs over time. If you are approaching retirement or already receiving Medicare, it may be worthwhile to discuss these strategies with your financial advisor or tax professional to ensure you are doing everything possible to keep these costs under control.
(Past performance is no guarantee of future results. The advice is general in nature and not intended for specific situations)