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Costco just handed its shareholders a holiday bonus, and it’s a lot bigger than a free sample.
The company declared a special cash dividend of $30 a share, payable Dec. 4 to shareholders of record as of the close of business Nov. 24. The total payout: about $13.3 billion. (1)
Own 100 shares? That’s $3,000. Nice. But I’ve been a CPA since 1981, and for some retirees, the dividend is only half the story. The other half shows up in 2028, courtesy of Medicare.
Here’s why. Medicare premiums for higher-income people are based on income from two years earlier. For 2026 premiums, Social Security generally uses tax returns filed in 2025 for tax year 2024. (2) So extra income you collect in 2026 can raise what you pay for Medicare in 2028.
And the surcharge works like a cliff. In 2026, a married couple filing jointly with modified adjusted gross income of $218,000 or less pays the standard Part B premium of $202.90 a month each. Go over, and each pays $284.10, plus $14.50 a month for Part D. (3)
If your income is well below that line, the Medicare issue may not touch you, and some shareholders will owe no federal income tax on this dividend at all. (4) Here are five things to check before Dec. 31.
1. Run the Medicare math first
Let’s say you and your spouse are both on Medicare and expect about $216,000 of modified adjusted gross income this year. A $3,000 Costco dividend puts you at $219,000, over the first 2026 surcharge line. (3)
At 2026 rates, the extra cost is $81.20 a month for Part B plus $14.50 for Part D (if you have it), or $95.70 a month each. That’s about $1,148 a year per person, or $2,297 for the couple. That’s most of the $3,000.
The 2028 income brackets haven’t been set yet, so your exact line may differ. But if you’re within a few thousand dollars of a Medicare bracket, this dividend matters.
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2. You may owe 0% federal tax on it
If it counts as a qualified dividend, here’s good news. For 2026, the 0% federal rate on qualified dividends and long-term capital gains applies up to $98,900 of taxable income for married couples filing jointly and $49,450 for single filers. (4)
That’s taxable income, after deductions, not total income. If your taxable income, including the dividend, stays under those lines, you’ll owe the IRS nothing on Costco’s check. Above them, a higher rate kicks in.
3. Watch the holding-period trap
A dividend gets the lower qualified rate only if you’ve held the stock long enough. The IRS carves out dividends on stock held less than 61 days during the 121-day period that began 60 days before the ex-dividend date. (5)
Translation: If you buy Costco shares just to grab the $30 and sell soon after, that dividend may be taxed at your regular income tax rate. Check your 1099-DIV next year.
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4. Higher earners can owe an extra 3.8%
The net investment income tax adds 3.8% on investment income, including dividends, to the extent your modified adjusted gross income tops $250,000 for married couples filing jointly or $200,000 for single filers. (6)
On a $3,000 dividend, that’s as much as $114 more.
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5. You still have until Dec. 31 to offset it
If the dividend pushes you toward a Medicare bracket, you have options this year. If you’re 70½ or older, a qualified charitable distribution lets you send up to $111,000 per person in 2026 straight from your IRA to charity, and it’s excluded from your gross income. (7)
If you were going to give to charity anyway and you take required minimum distributions, a QCD counts toward your RMD. That money stays out of your income and can make room for the dividend. (7)
And if your Costco shares sit in a traditional IRA, relax. Amounts in a traditional IRA, including earnings, generally aren’t taxed until you take them out. (8)
My take
A $30-a-share bonus is a nice problem to have, and in my view, for many shareholders that’s all it is. The tax will be modest or zero.
But if you’re a retiree with a solid income, look before Dec. 31. Pull up your income so far this year, add the dividend, and compare the total with the Medicare lines. Ten minutes now could save you a couple thousand dollars two years from now.
This year, the best bargain at Costco might be the one you find on your own tax return.
Sources: 1. Costco Wholesale (GlobeNewswire); 2. Social Security Administration; 3. Centers for Medicare & Medicaid Services; 4. IRS (Rev. Proc. 2025-32); 5. IRS; 6. IRS; 7. Congressional Research Service; 8. IRS
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