What Income Determines Your Medicare Premiums: MAGI and 2026 IRMAA

Medicare bases your monthly premiums on your Modified Adjusted Gross Income, or MAGI, from the federal tax return you filed two years earlier. For 2026 premiums, that’s the 2024 return you filed in 2025. If that MAGI came in at or below $109,000 as a single filer or $218,000 as a joint filer, you pay the standard Part B premium and no surcharge on Part D. Above those thresholds, an Income-Related Monthly Adjustment Amount (IRMAA) is added to both.1Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles So the practical question is which dollars feed that MAGI number and which don’t.

How Medicare Defines MAGI

The formula is short. Medicare MAGI equals the adjusted gross income on line 11 of your Form 1040, plus the tax-exempt interest on line 2a.2Social Security Administration. Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event Worksheet For most beneficiaries, that’s the entire calculation.

This is not the same MAGI the IRS uses elsewhere. The general IRS version adds nontaxable Social Security and foreign earned income back to AGI.3Internal Revenue Service. Modified Adjusted Gross Income Medicare’s version is narrower. If you’ve seen MAGI used for Affordable Care Act subsidies or Roth IRA contribution limits, don’t assume the figure carries over.

Income That Counts

Anything that lands on line 11 of your 1040 feeds your Medicare MAGI. The most common sources:

  • Wages, bonuses, and self-employment income.
  • Investment income: dividends, interest from bank and brokerage accounts, and capital gains from selling stocks, real estate, or other assets.
  • Distributions from traditional IRAs, 401(k)s, 403(b)s, and pensions. A single large withdrawal can push you into a higher IRMAA bracket two years later.
  • The taxable portion of your Social Security benefits, which can run as high as 85% depending on your other income.
  • Net rental income, partnership distributions, and S-corporation income.
  • Alimony received under divorce agreements finalized before 2019. Agreements executed after December 31, 2018, treat alimony as nontaxable to the recipient, so it stays out.

Then comes the add-back that catches people off guard: tax-exempt interest. Municipal bond interest doesn’t appear in your AGI, but Medicare pulls it in from line 2a.4Social Security Administration. Premiums: Rules for Higher-Income Beneficiaries A large municipal bond portfolio can lift you across an IRMAA threshold even when your taxable income looks modest.

Income That Doesn’t Count

If a dollar doesn’t reach line 11 and isn’t tax-exempt interest, it doesn’t move your Medicare premium.

  • Qualified distributions from Roth IRAs and Roth 401(k)s. Because they’re tax-free, they never enter AGI. This is why some planners recommend converting traditional balances to Roth accounts before Medicare enrollment, accepting the tax now to hold MAGI down later. The conversion itself, though, is taxable in the year you make it.5Internal Revenue Service. Publication 590-A, Contributions to Individual Retirement Arrangements
  • Gifts and inheritances.
  • Life insurance death benefits paid to you as a beneficiary.
  • Loan proceeds, including payments from a reverse mortgage.
  • Return of your own basis, such as Roth contribution withdrawals or the after-tax portion of an annuity payment.

Above-the-line deductions also work in your favor, because they reduce AGI directly. Contributions to a Health Savings Account come out before line 11.6Internal Revenue Service. HSA Contributions So do deductible traditional IRA contributions, student loan interest, and the self-employed health insurance deduction. The standard deduction and itemized deductions sit below line 11 and do nothing for your Medicare MAGI.

The Two-Year Look-Back

Medicare doesn’t use your current income. Social Security pulls the return from two years prior, so 2026 premiums come from your 2024 return.4Social Security Administration. Premiums: Rules for Higher-Income Beneficiaries If that return hasn’t been processed yet, SSA falls back to the prior year’s data.7Office of the Law Revision Counsel. 42 US Code 1395r – Amount of Premiums for Individuals Enrolled Under Part B

The lag creates a real problem for new retirees. Earn $300,000 in 2024, retire in early 2025, and your 2026 premiums still reflect the working-year income even though you’re living on far less. The same lag makes one-time income spikes echo forward two years. Selling a rental, exercising stock options, or converting a large traditional IRA in a single year can trigger surcharges you’ll feel long after the money is spent, which is why people who plan these transactions often spread them across tax years.

2026 Thresholds and What Crossing One Costs

The standard 2026 Part B premium is $202.90.1Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles At or below $109,000 (single) or $218,000 (joint), you pay that and nothing more. Above the threshold, the surcharge structure has five tiers.

  • $109,001–$137,000 single / $218,001–$274,000 joint: $81.20 surcharge, total $284.10.
  • $137,001–$171,000 single / $274,001–$342,000 joint: $202.90 surcharge, total $405.80.
  • $171,001–$205,000 single / $342,001–$410,000 joint: $324.60 surcharge, total $527.50.
  • $205,001–$499,999 single / $410,001–$749,999 joint: $446.30 surcharge, total $649.20.
  • $500,000 or more single / $750,000 or more joint: $487.00 surcharge, total $689.90.

These are cliffs, not slopes. A MAGI of $109,001 sits in the same tier as $136,999, and that single extra dollar of income costs roughly $974 in extra premiums over the year.

Part D uses the same thresholds with its own surcharge amounts, added on top of whatever your drug plan charges:1Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles

  • Tier 1: $14.50 per month.
  • Tier 2: $37.50 per month.
  • Tier 3: $60.40 per month.
  • Tier 4: $83.30 per month.
  • Tier 5: $91.00 per month.

At the top bracket, a single filer pays $578.00 per month above the standard premiums once Part B and Part D surcharges are combined.

One boundary worth flagging: if you’re married, lived with your spouse at any point during the year, and file separately, the bracket structure collapses to just two tiers. MAGI between $109,001 and $390,999 draws a $446.30 Part B surcharge and an $83.30 Part D surcharge; $391,000 or more draws $487.00 and $91.00.1Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles A married-filing-separately filer at $110,000 pays the same IRMAA as a single filer at $400,000. If you and your spouse lived apart for the entire year, this compressed structure does not apply and SSA treats you as a single filer.

Part A premiums are not subject to IRMAA. Roughly 99% of beneficiaries pay nothing for Part A because of their own or a spouse’s work record, and those who do owe a Part A premium are billed based on quarters of covered employment, not income.

If Your Income Has Dropped

You don’t have to wait two years for a lower income to reach your premium. File Form SSA-44 and ask Social Security to use a more recent or estimated year instead.8Social Security Administration. Request to Lower an Income-Related Monthly Adjustment Amount (IRMAA) The drop has to be tied to one of these qualifying life-changing events:

  • Marriage.
  • Divorce or annulment.
  • Death of a spouse.
  • Work stoppage or reduction in hours, including retirement.
  • Loss of income-producing property outside your control, such as a natural disaster destroying a rental. A voluntary sale does not qualify.
  • An employer settlement payment that affected income in the look-back year.

On the form, you identify the event and give SSA your estimated AGI and tax-exempt interest for the year you want used.2Social Security Administration. Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event Worksheet Bring documentation: a death certificate, divorce decree, letter from an employer confirming retirement, or the equivalent. Where formal documentation isn’t available for a work stoppage, SSA will accept a signed statement under penalty of perjury.

Newly enrolled retirees hit this most often. Your two-year-old return still shows working-year income, and the SSA-44 route lets SSA use your current, lower income instead.8Social Security Administration. Request to Lower an Income-Related Monthly Adjustment Amount (IRMAA) If you’re enrolling in Medicare and your income has fallen substantially since two years ago, file the form as soon as you can.

If SSA denies the request, or if you think the underlying IRMAA determination used bad data, there is a formal appeal process starting with reconsideration by a different SSA employee and running up through an Administrative Law Judge hearing, Medicare Appeals Council review, and federal court.9Social Security Administration. Overview of the Appeals Process for the Income-Related Monthly Adjustment Amount Most disputes end at reconsideration, particularly when the original figure came from outdated or amended IRS data. If you filed an amended return that changed your AGI for the look-back year, submit the amended return and the IRS acceptance letter with your request.