IRMAA: How Medicare's Income Surcharge Works and the Two-Year Lookback That Catches People

IRMAA is an income-related surcharge that Medicare adds to your Part B and Part D premiums once your income crosses a set threshold, on top of the standard premium everyone pays. The name stands for income-related monthly adjustment amount, and the sting is in the timing: the premiums you pay this year are set by your tax return from two years ago, so a decision you make at 63 can quietly raise your bill at 65.

I have not started Medicare yet, but IRMAA moved onto my radar the moment I understood the two-year lookback, because I retired in my late fifties and the years right before 65 are exactly when a lot of us have unusual income: a final year of full salary, a house sale, a big withdrawal to bridge the gap. Here is the plain-English version, checked by a CERTIFIED FINANCIAL PLANNER, and how it fits into the wider picture of Medicare and its costs.

What IRMAA actually is

IRMAA is not a separate bill; it is an extra amount bolted onto your standard Medicare premiums when your income is above a threshold. Everyone on Medicare pays a standard Part B premium, and most people stop there. If your income is high enough, Social Security adds a surcharge to both your Part B premium and your Part D drug premium¹.

The part that surprises people is who runs it. Medicare is the coverage, but the surcharge is calculated and collected by the Social Security Administration, using income figures handed over by the IRS². That is why the letter telling you about it comes from Social Security, not from Medicare, and why the appeal process goes through Social Security too.

The income that triggers it

IRMAA is based on your modified adjusted gross income, which is your adjusted gross income plus any tax-exempt interest. For most retirees that means your withdrawals from traditional accounts, the taxable part of your Social Security, pensions, dividends, capital gains, and any interest from municipal bonds, all added together².

There are five higher-income tiers above the standard premium, each with its own income threshold and its own surcharge. In 2025 the first tier began at a modified adjusted gross income above roughly $106,000 for a single filer and about $212,000 for a couple filing jointly, and the figures move up a little most years¹. What counts is worth learning precisely, because the things that keep you below a threshold, such as tax-free Roth withdrawals, are the same levers covered in taxes in retirement.

The two-year lookback

Your Medicare premiums in a given year are set by your tax return from two years earlier, not your current income. So the surcharge you might pay in 2026 generally reflects the income on your 2024 return². This lag is the single most important thing to understand about IRMAA.

It cuts both ways. The good news is that IRMAA is not permanent: if you have one high-income year and normal income after that, you pay the surcharge for the single year that reflects the spike, and then it falls away once the lower income shows up in the lookback. The hard news is that the trigger can arrive when you least expect it. A large withdrawal or a Roth conversion done in a low-income gap year still lands on your income for that year, and it can bump your premiums two years down the road. This is why the timing of big withdrawals sits right next to the timing of required minimum distributions, which themselves push income up starting at 73.

How much it adds

The surcharge climbs steeply as you move up the tiers, and it applies to Part B and Part D separately. In 2025 the Part B surcharge ranged from roughly $74 a month at the first tier to about $444 a month at the top tier, added on top of the standard Part B premium¹. On top of that, Part D carried its own IRMAA surcharge, smaller but real, layered onto whatever your drug plan already charges³.

Run the top tier out over a year and a couple can be paying well over $10,000 more than the standard premiums, purely because of income. The exact dollar amounts and thresholds are reset annually, so treat any figure you read, including these, as a snapshot and confirm the current numbers at Medicare.gov.

The cliff that catches people

IRMAA is a cliff, not a gentle slope: one dollar of income over a threshold moves you into the entire next tier. Unlike the income tax, where crossing into a new bracket only taxes the dollars above the line at the higher rate, IRMAA has no phase-in. Go one dollar over and the full higher surcharge applies for the whole year².

That makes the edges genuinely dangerous. A retiree sitting just under a threshold who takes one extra withdrawal in December, or realizes a slightly larger capital gain than planned, can trigger a surcharge that costs far more than the extra income was worth. When my own advisor conversation eventually turns to drawing down accounts, this is the number I will be watching before I press the button on anything large, and it is exactly the kind of edge a good fiduciary advisor earns their fee catching.

Appealing after a life-changing event

If your income dropped because of a life-changing event, you can ask Social Security to use more recent figures instead of the two-year-old return. Retirement is one of the qualifying events, which matters enormously, because the person most likely to be hit by an unfair surcharge is someone who just stopped working and whose old return still shows a full salary².

You make the request on Form SSA-44, providing proof such as a signed statement that you have stopped working, and Social Security recalculates using your estimated current income⁴. Other qualifying events include marriage, divorce, the death of a spouse, and the loss of a pension or income-producing property. One important limit: a one-time capital gain, on its own, is not a life-changing event, so selling a house or converting to Roth cannot be appealed away. That is precisely why those decisions belong in a plan rather than a spur-of-the-moment move.

Where IRMAA fits in your plan

Think of IRMAA as one more reason income timing matters as much as income size in retirement. It sits alongside the taxation of your Social Security and your required withdrawals, and the same moves that smooth one tend to smooth the others: spreading withdrawals out, building some tax-free Roth money before you need it, and knowing where the thresholds fall in the two years before you sign up.

This is general information, not personalized tax or financial advice, and the thresholds, tiers, and dollar amounts change every year, so confirm your own numbers at Medicare.gov and SSA.gov⁵. For a decision as sharp-edged as a bracket cliff two years in the future, a fiduciary advisor or tax professional who can model your actual return is often worth far more than they cost.