Your 2024 income could raise your Medicare costs in 2026—here’s how to avoid paying more than you should

Here's a question that might stump you: What was your exact income in 2024? If you're scratching your head, you're not alone. But here's why it matters more than you might think—that number could determine whether you'll pay hundreds or even thousands of dollars more for Medicare coverage in 2026.

This isn't some distant concern. Medicare's open enrollment for 2026 coverage begins October 15, and your eligibility is based on your income two years before the assessment. That means your 2024 tax return will directly impact what you pay for Medicare premiums starting January 2026.

The culprit is called the Income-Related Monthly Adjustment Amount (IRMAA), a surcharge that affects roughly 8% of Medicare beneficiaries but catches many people completely off guard.

What exactly is IRMAA and why should you care?

Think of IRMAA as Medicare's version of a luxury tax. If your income exceeds certain thresholds, you'll pay extra premiums on top of the standard Medicare costs for both Part B (medical coverage) and Part D (prescription drugs).

Here's what makes IRMAA particularly frustrating: it's a “cliff” surcharge, meaning if your modified adjusted gross income exceeds the threshold by as little as a dollar, you'll have to pay higher premiums.

For 2025, beneficiaries whose 2023 income exceeded $106,000 for individuals or $212,000 for couples filing jointly are paying these surcharges. But remember, this is based on income from two years ago—so if you had a particularly good year in 2024, you might be in for a surprise come 2026.

The real cost of crossing the line

Let's talk numbers. The standard Medicare Part B premium is $185 for 2025, up from $174.70 in 2024. But IRMAA can add significantly more to your monthly bills.

Based on projections from the Medicare Trustees Report, here's what high earners might pay in 2026 (these are estimates, as final amounts haven't been announced):

First IRMAA tier: Individuals earning $109,001-$137,000 or couples with $218,001-$274,000 could pay an additional $82.60 monthly for Part B coverage, plus $14.50 for prescription drug coverage.

Higher tiers: The surcharges climb steeply, with the highest earners (individuals over $500,001 or couples over $750,001) potentially paying an extra $495.60 monthly for Part B and $85.80 for Part D coverage.

That's nearly $600 extra per month, or over $7,000 annually, just in Medicare surcharges.

Also read: Are you spending too much on Medicare? Here’s how to cut costs in retirement

The part D surprise: Bigger increases coming

While Part B IRMAA surcharges are projected to increase modestly in 2026, Part D surcharges may increase by close to 6%, significantly outpacing the roughly 1% increase expected for Part B surcharges.

This means prescription drug coverage could become disproportionately expensive for higher-income Medicare beneficiaries. Nearly 4.5 million Americans currently pay Part D IRMAA, with forecasts suggesting 7.7 million will pay by 2034.

Smart strategies to minimize IRMAA

If you're still working and under 65, the best time to plan for IRMAA is decades before you need Medicare. Here are key strategies:

• Maximize Roth contributions: Aim to have about one-third of your retirement savings in Roth accounts. Since Roth distributions don't count as taxable income, they won't trigger IRMAA.
• Strategic Roth conversions: Take advantage of lower-income years—perhaps during layoffs, career transitions, or years when you're caring for family—to convert traditional retirement account funds to Roth accounts.
• Fill your tax bracket: If you're in the 22% tax bracket and have room before hitting the next bracket at $105,700 (for 2025), consider doing Roth conversions up to that limit.

If you're approaching 65, don't panic if you're getting close to Medicare age without having done extensive IRMAA planning. You still have options:

• Consider working less: If possible, reduce your income in the years before Medicare eligibility to stay below IRMAA thresholds.
• Strategic "band-aid ripping": Some advisors suggest doing several years of large Roth conversions early in retirement, accepting higher IRMAA payments for a shorter period rather than smaller surcharges for many years.
• Time your retirement income: Be strategic about when you take Social Security, pension distributions, and retirement account withdrawals.

The appeals process: Your safety net

Life happens, and sometimes your income changes dramatically after you file your taxes. Fortunately, you can appeal IRMAA determinations if you experience qualifying life-changing events.

You can request that Social Security use more recent tax information if you experienced a reduction in income due to a life-changing event, such as:

• Marriage or divorce
• Death of a spouse
• Job loss or reduction in work hours
• Loss of pension or other income source
• Natural disasters or employer settlements

You have 60 days from receiving your IRMAA notice to file an appeal with Social Security using Form SSA-44.

Also read: When to sign up for Medicare: Key dates and tips to avoid penalties

Advanced planning: The Roth conversion sweet spot

Here's where strategic planning gets sophisticated. Required Minimum Distributions (RMDs) from traditional retirement accounts begin at age 73, and these distributions count as taxable income that can trigger IRMAA.

By doing Roth conversions in your early retirement years (before RMDs kick in), you can:

• Reduce the size of accounts subject to RMDs
• Create tax-free income streams that won't trigger IRMAA
• Potentially stay below IRMAA thresholds throughout retirement

However, remember that Roth conversions themselves count as taxable income in the year you do them, so timing is crucial.

What this means for your retirement planning

The growth in IRMAA payers isn't just a statistic—it reflects the reality that more retirees are finding themselves subject to these surcharges. This trend is likely to continue as income thresholds adjust more slowly than actual retirement income growth.

Consider IRMAA as part of your comprehensive retirement tax strategy. It's not just about what you'll pay in income taxes, but also how your income affects your Medicare premiums, Social Security taxation, and overall retirement cash flow.

Also read: Unlock the financial secrets of the experts with by using this smart move with your 401(k)

Taking action before October 15

Medicare's open enrollment period runs from October 15 through December 7, giving you time to review not just your plan options, but also your income planning strategies for the future.

If you discover that your 2024 income might trigger IRMAA for 2026, start planning now. Consider whether you can adjust your 2025 income through strategic retirement account withdrawals, Roth conversions, or the timing of other income sources.

The two-year lag in IRMAA calculations means you can't fix 2024's impact on 2026 premiums, but you can start planning for 2027 and beyond.

Read next:

• Medicare 2026 update: What to know about premiums, benefits, and plan choices
• CVS says quality coverage is on the rise—81% of members now in highly rated Medicare Advantage plans
• Are you missing out on these 10 easy retirement payouts? See what extra money you could be claiming!

Key Takeaways

• Medicare premiums and surcharges (called IRMAA) for 2026 are based on your income from two years earlier, so what you earn in 2024 will impact what you pay.
• High-income earners can face significantly higher monthly premiums for both Medicare and prescription drug coverage, with extra charges potentially more than doubling the standard rates.
• Financial advisers recommend early retirement planning strategies such as Roth conversions to reduce future taxable income and avoid unexpected Medicare surcharges, but warn these need careful timing due to tax implications.
• Seniors who experience a significant drop in income due to major life events can appeal Medicare surcharges, and sometimes have IRMAA refunded, especially if the income spike was a one-off (like a Roth conversion).

What's your experience been with Medicare premium planning? Have you been surprised by IRMAA, or have you successfully planned around it? Share your thoughts and questions in the comments below—your insights might help other readers navigate this complex but important aspect of retirement planning.