IRMAA: Why Your Medicare Premiums May Be Based on Income From Two Years Ago

A lot of people are surprised when their first Medicare premium notice comes in higher than they expected, especially right after they’ve retired and their income has dropped. The reason is usually IRMAA, and the income it’s based on is often from two years back. Here’s how it works, and what you can do if your situation has changed.

What IRMAA is

IRMAA stands for Income-Related Monthly Adjustment Amount. It’s an extra amount that people with higher incomes pay on top of their premiums for:

• Medicare Part B (medical insurance), and
• Medicare prescription drug coverage (Part D)

The Social Security Administration (SSA) decides whether IRMAA applies, based on your modified adjusted gross income (MAGI). For this purpose, SSA defines MAGI as your adjusted gross income plus tax-exempt interest income. If you have only one of the two coverages, the adjustment applies only to that one.

Why it’s based on income from two years ago

SSA uses the most recent federal tax return the IRS provides. For 2026 premiums, that’s generally the return filed in 2025 for tax year 2024. Sometimes SSA only has the year before that (2023); if so, and you’ve filed for 2024 (or didn’t need to), SSA says to contact them so they can update your records.

This lag explains the “premium shock.” Income from a year when you were still working full-time, or had a one-time spike, can show up on your Medicare premiums two years later.

Who pays it (2026 figures)

For 2026, SSA says IRMAA applies if your MAGI is above $109,000 (individual tax return) or above $218,000 (married filing jointly). Above those levels, there are several income tiers, and the higher the tier, the higher the adjustment. SSA publishes the full chart each year. (Figures from SSA’s 2026 page; thresholds and amounts change annually. CMS will announce the 2027 amounts later this year.)

A few details people don’t expect:

• It’s a tiered system, so going slightly over a threshold can move you into the next bracket.
• The Part D adjustment is tied to a national base premium, not to your own plan’s premium, and SSA deducts it from your Social Security payment no matter how you normally pay your plan. If your payment isn’t large enough, or you’re not receiving benefits yet, you get a separate bill.
• It’s recalculated every year from newer tax information. A high-income year doesn’t mean higher premiums forever.

One-time income spikes that can show up later

Examples of events that can raise income in a given year include:

• A final year of full salary, or a bonus, severance, or retirement incentive
• Large withdrawals from a traditional IRA or 401(k)
• Converting traditional retirement money to a Roth account
• Selling a home, rental property, business, or investments at a gain

Whether and how much any of these affects your MAGI depends on your tax situation. That’s a question for a tax professional.

If your income has dropped: Form SSA-44

If you’ve had a life-changing event that reduced your income, you can ask SSA to use a more recent year’s income. The events SSA lists include:

• Marriage, divorce or annulment, or the death of a spouse
• You or your spouse stopped working or reduced work hours
• Loss of income-producing property because of a disaster or another event beyond your control
• A scheduled stop, termination, or reorganization of an employer’s pension plan
• A settlement from a current or former employer because of the employer’s closure, bankruptcy, or reorganization

You make the request with Form SSA-44, “Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event.” You can submit it online after signing in, fax or mail it with your evidence to a Social Security office, or call 1-800-772-1213 (TTY 1-800-325-0778). SSA asks for documentation of the event and of the income reduction, such as a letter from your employer about your retirement, or a death certificate, and your signed tax return for the year in question if you filed one.

Newly retired? “Work stoppage” (you or your spouse stopped working or cut back hours) is one of the listed events. A letter from your employer showing your retirement date is the kind of evidence SSA mentions.

Other ways to correct or challenge it

• Amended tax return: if you amended a return in a way that changes the income SSA counted, call SSA and provide a copy of the amended return and the IRS acknowledgment.
• Disagree with the decision: you can appeal online or with Form SSA-561-U2 (Request for Reconsideration). You don’t need to appeal if you’re asking for a new decision because of a life-changing event.
• Wrong income from the IRS: if the income figure itself is wrong, SSA says it has to be corrected with the IRS.

Planning in the years before Medicare

Because of the two-year look-back, the income you report at around ages 63 and 64 may affect your premiums when Medicare begins. If you expect a large one-time income event, such as a property sale, a big retirement account withdrawal, or a Roth conversion, it can be worth asking a tax professional how the timing might affect IRMAA, alongside everything else it affects.

This is not tax advice. I’m not a tax professional, and IRMAA rules interact with your whole tax picture. Please talk with a CPA or other qualified tax professional before making decisions based on IRMAA.

If you live in Texas or one of the other states where I’m licensed, and you’d like to talk through how Medicare decisions fit with the rest of your retirement and family planning, I’m happy to answer questions plainly, with no pressure. You’re welcome to book a conversation This is a solicitation for insurance. or call me at 346-258-7080. For free, unbiased one-on-one Medicare counseling, you can also call the Texas Health Information, Counseling and Advocacy Program (HICAP) at 800-252-9240.

Chris Gavrel, independent licensed insurance agent

This article is for general educational purposes only and is not legal, tax, or financial advice. Medicare rules, enrollment periods, and dollar amounts change, and some rules vary by state. Confirm current details with Medicare.gov, Social Security, or your state’s insurance department before making a decision.

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