Have you opened a Medicare premium notice and thought, “Wait… why did this get so expensive?” You’re not alone. One of the most common surprise costs for retirees (especially after a big-income year) is IRMAA.
IRMAA stands for Income-Related Monthly Adjustment Amount. It’s an extra monthly surcharge added to your Medicare Part B premium (medical coverage) and/or your Medicare Part D premium (prescription drug coverage) when your income exceeds certain thresholds.
This post breaks down how IRMAA works, how to think about IRMAA, and planning moves that can help you avoid unnecessary surcharges. This is how I think about it—and as with all tax decisions, you should work with a qualified professional to evaluate your specific situation.
What income does Medicare use for IRMAA?
IRMAA is based on your Modified Adjusted Gross Income (MAGI) from two years prior. That means:
- Your 2024 MAGI generally affects 2026 IRMAA
- Your 2025 MAGI generally affects 2027 IRMAA
Social Security typically sends an initial determination notice after it has your tax return data, and those notices can feel “late” because they arrive after you’ve already moved on from the year that caused the spike. The result: sometimes you have to respond and plan quickly.
Many people get hit with an IRMAA assessment right after:
- retiring (income drops now, but Medicare is still looking at the high-income year)
- selling a property
- doing a large Roth conversion
- recognizing a large capital gain
Is it “bad” to pay IRMAA? Treat it like a tax rate decision.
Paying an IRMAA surcharge doesn’t mean you did something wrong. It means Medicare looked at your income (often from two years ago) and determined you fall into a higher-income premium tier.
In practice, IRMAA functions a lot like a tax: as your income rises past certain thresholds, Medicare costs rise too.
What is a “tax”?
A tax is a mandatory payment to the government used to fund public programs and services. It isn’t optional, and it’s typically triggered by something measurable—like income, wages, purchases, or property value.
IRMAA isn’t labeled as a “tax” on your tax return, but it behaves similarly because it’s:
- government-imposed
- income-based
- tiered (bracketed)
- and it increases your cost when income crosses thresholds
Is IRMAA bad?
A better question is: “What’s the effective rate on the next dollar of income?”
To decide whether paying IRMAA is “bad,” you have to evaluate it the same way you’d evaluate any other tax cost: as part of your marginal (next-dollar) tax rate.
That means when you consider an income decision (like a Roth conversion, IRA withdrawal, capital gain, bonus, or business sale), you don’t just look at your federal bracket. You look at the combined cost of the next dollar of income, which can include:
- Federal income tax
- State income tax (if applicable)
- Net Investment Income Tax (NIIT), where applicable
- How additional income increases taxation of Social Security
- IRMAA Part B increase
- IRMAA Part D increase
When IRMAA is in play, the “true” marginal cost of additional income can jump in a way that surprises people, because you’re not only paying more tax—you may also be paying higher Medicare premiums.
Why this framing matters: IRMAA creates “cliffs” that can produce shocking effective tax rates
One of the trickiest parts of IRMAA is that it can work like a cliff rather than a smooth slope.
If you cross an IRMAA threshold by even $1, the consequence isn’t “a tiny surcharge on that $1.” The consequence can be that you pay the higher Medicare premium tier for the period it applies (often across many months), potentially for each covered person. This means that the cost could be over $2,000 in tax for making only $1 more.
A simple way to think about it is:
Effective IRMAA rate on the “extra income”
= (Extra IRMAA cost caused by the tier being crossed) ÷ (Income over the tier threshold)
When that numerator is large (often hundreds or thousands of dollars) and the denominator is small (maybe only $1 to a few hundred dollars over the threshold), the “rate” can become absurdly high. Sometimes over 100,000% taxation.
This is why IRMAA planning is not about avoiding taxes at all costs—it’s about being intentional. Sometimes paying IRMAA is absolutely worth it (for example, a Roth conversion that reduces future RMDs). But other times, especially when you’re right on the edge, it may be more efficient to:
- reduce or delay the income that pushes you over, or
- increase income strategically (so you’re not paying a surcharge without getting a meaningful benefit which typically means recognizing the entire IRMAA tier)
A counterintuitive tax bracket truth (and why retirees need multi-year planning)
IRMAA can create situations where your combined marginal rate is higher in the “lower” bracket year than in a “higher” bracket year—because the Medicare cliff overwhelms the difference in ordinary tax rates.
That’s why I sometimes ask clients (and tax pros):
If you’re willing to pay an effective 26% on a band of income in the 22% bracket, why wouldn’t you be willing to pay 24% in the 24% bracket—if it could prevent an IRMAA cliff and improves your multi-year outcome?
Retirement tax planning is often less about “this year’s bracket” and more about how today’s decision changes your marginal rate across multiple future years.
What makes planning for IRMAA hard?
Here is where this gets extremely dense and complicated.
The brackets don’t exist when you need them. Remember that we look backwards 2 years to identify our IRMAA. Our current year, 2026 IRMAA was determined through our 2024 tax return which was a reflection of 2024 income. Our 2028 IRMAA will be determined through our 2026 tax return which is a reflection of our 2026 income. The catch is that 2028 IRMAA brackets haven’t been released yet as I write this in 2026, and most planning software completely ignores the increase. This results in planning software not optimizing the full band of expected IRMAA bracket increase and results in increased effective tax rates.
In the past years, the IRMAA income brackets have increased around 3% which has a large impact on higher income planning when MAGIs are $400,000. Keep in mind, there is no guarantee that the brackets will increase, they might even decrease. By software not including it there is a much higher probability that your income will slightly surpass a threshold, triggering an IRMAA cliff, where you may have preferred recognizing additional income.
This is not a black and white topic. Reaching out to someone who understands it and educates you on the position being taken, the assumptions being made, and walking you through the calculation would heavily advantage you in making the right decision.
Next steps: get IRMAA help that fits your full retirement plan
IRMAA is one of those Medicare “tax-like” costs that can sneak up on retirees—especially after a one-time income spike from a Roth conversion, capital gain, or property sale. If you’re close to an IRMAA threshold (or you’re planning a big move this year), a quick projection can often tell you whether you’re making a smart tradeoff—or accidentally stepping into a costly cliff.
If you’d like help modeling your options, we’d be happy to help. You can schedule a call with Blue Heron CPAs to review your income strategy, your Medicare brackets, and how today’s decisions may affect taxes and premiums over the next several years.
This article is for general informational and educational purposes only and is not tax, legal, or financial advice. The article is written from the perspective of a Florida individual where other states may have different laws. Use it to help you ask better questions about your situation. For advice tailored to you, consult a qualified tax professional.
About Nathan Gauger, CPA
Nathan Gauger is the Managing Partner of Blue Heron CPAs and focuses on retirement tax planning—helping retirees make confident decisions around Roth conversions, RMDs, Social Security timing, and Medicare-related costs like IRMAA. His goal is simple: make sure your tax plan supports the life you want in retirement, not just the return you file this year.
➡️ Ready to talk? Visit BlueHeronCPAs.com and use the “Book a Meeting” page to schedule a consultation.