If you are a wealthy person heading into retirement, prepare for some potential sticker shock once you enroll in Medicare.
About 8% of enrollees earn enough income to be subject to a surcharge that is added to their Medicare premiums. It’s called an income-related monthly adjustment amount, or IRMAA.
In other words, an IRMAA is essentially a higher Medicare premium that some retirees must pay because their income exceeds a particular threshold (which we’ll get into in a minute).
IRMAAs apply to premiums for both Medicare Part B (which covers outpatient care like doctor appointments) and Medicare Part D (which covers prescription drugs).
The standard Part B premium, for example, is $202.90 per month in 2026. But for people subject to IRMAAs, their Part B premium can be anywhere from $284 to $690 per month, depending on exactly how high their income is.
How IRMAAs are calculated
The federal government uses what it calls your modified adjusted gross income (MAGI) to determine if you are subject to IRMAAs and, if so, how high your IRMAA should be.
As of 2026, you generally are subject to IRMAAs if either of the following situations applies:
- Your federal income tax filing status is married filing jointly and your MAGI exceeds $218,000.
- You have any other tax filing status and your MAGI exceeds $109,000.
The particular formula that the government uses to compute your MAGI is: your adjusted gross income (which can be found on your tax return) plus your tax-exempt interest income (also on your return).
Typically, these amounts are pulled from two years prior. So, in most cases, the government would use numbers from 2024 returns to determine IRMAAs for 2026.
It’s possible to appeal an IRMAA if a life-changing event — such as divorce, the death of a spouse or loss of income — has decreased your income in the past two years. But typically, the only way to avoid or minimize IRMAAs is to understand the types of income that factor into IRMAAs and minimize them (although we mention a few other tricks in “8 Ways to Avoid Paying More in Medicare Premiums“).
Following is a look at all the types of income that factor into your MAGI. That means any of these types of income could increase your Medicare premium if you earn enough of it.
Note that all mentions of taxable or non-taxable income in this story refer to federally taxable or non-taxable income. All mentions of tax returns refer to federal returns.
1. Tax-exempt interest
What it is: “Tax-exempt interest” refers to interest you earned that is not subject to federal income taxes, such as interest from municipal bonds.
How to tell if you have this type of income: See line 2a of your 2024 tax return.
2. Earned income
What it is: Earned income is income you earn by working. That makes it different from passive income such as interest, dividends and other investment gains.
Virtually all types of earned income factor into the MAGI formula used to determine Medicare premiums: Only nontaxable military combat pay — a type of income seniors likely do not have in the first place — is excluded.
How to tell if you have this type of income: See lines 1a through 1h of your 2024 tax return.
3. Ordinary dividends
What it is: Ordinary dividends are payments to shareholders out of a company’s profits. Such payments are made periodically and are taxed at ordinary income rates.
How to tell if you have this type of income: See line 3b of your 2024 tax return.
4. Taxable IRA distributions
What it is: For retirees on Medicare, “taxable IRA distributions” refers to withdrawals from traditional individual retirement accounts. Generally, such withdrawals are considered taxable income, while Roth IRA withdrawals are not.
So, retirees who withdraw from a traditional IRA boost their taxable income for the year of the withdrawal. That increase in taxable income could in turn lead to an increase in their Medicare premiums.
The same is not true of withdrawals from Roth IRAs, though. That means a little-known advantage of Roth IRAs over traditional IRAs is that withdrawals can’t lead to higher Medicare premiums.
How to tell if you have this type of income: See line 4b of your 2024 tax return.
5. Taxable pension and annuity income
What it is: Pensions are payments companies and other organizations make to retirees. Annuities are insurance contracts in which a retiree makes a lump-sum payment in exchange for a steady stream of lifetime income from the insurer.
Any portion of such income that is taxable factors into the MAGI formula used to determine Medicare premium. So do withdrawals from 401(k), 403(b), and governmental 457(b) plans if they are taxable.
How to tell if you have this type of income: See line 5b of your 2024 tax return.
6. Taxable Social Security benefits
What it is: Up to 85% of your Social Security benefit may be taxable, depending on what the government calls your “combined income.”
To learn more about combined income, check out “7 Ways to Avoid Paying Taxes on Your Social Security Income.”
How to tell if you have this type of income: See line 6b of your 2024 tax return.
7. Capital gains
What it is: Capital gains are profits you make when selling capital assets, such as stocks and real estate.
Don’t worry if you’re a homeowner, though: Gains you make from selling your primary home won’t necessarily drive up your MAGI or thus drive up your Medicare premiums. That’s because such gains are often exempt from federal income taxes, as we detail in “9 Federal Tax Breaks for Homeowners in 2025 — and How Much They’re Worth.”
How to tell if you have this type of income: See line 7 of your 2024 tax return.
8. Additional income
What it is: Additional income is defined as the sum of these things:
- Taxable refunds, credits, or offsets of state and local income taxes
- Alimony received
- Business income or loss (from Schedule C, which would be attached to your tax return)
- Other gains or losses from the sale of business property (from Form 4797, which would be attached to your return)
- Income or loss from rental real estate, royalties, partnerships, S corporations, estates, trusts and residual interests in real estate mortgage investment conduits (from Schedule E)
- Farming income or loss (from Schedule F)
- Unemployment compensation
- Other income (This includes many forms of non-earned income, including but not limited to: gambling winnings, canceled debt, Alaska Permanent Fund dividends, jury duty pay, income from renting personal property, and pension or annuity income from a nonqualified deferred compensation plan or a nongovernmental 457 plan)
How to tell if you have this type of income: See line 8 of your 2024 tax return.
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