How to avoid the Medicare surcharge (IRMAA).

Most people meet the Medicare surcharge by opening a letter. The premium is going up, sometimes by several hundred dollars a month. The reason is something on a tax return you filed two years ago.

By then there's very little to do about it. Which makes this a planning problem rather than a Medicare problem.

The short answer. The surcharge is based on your income from two years earlier, and it steps up in jumps. Crossing a line by one dollar costs the same as crossing it by thousands.

So plan the income you recognize now against where those lines sit. And if your income has dropped because you retired, you can appeal.

How it works.

Medicare charges a standard premium, and above certain income levels it charges more. That extra is the surcharge, and three features of it matter.

It looks back two years. Your 2026 premium is set by your 2024 income. Every decision you make this year is setting a premium you won't see for two years.

It steps in jumps. The surcharge doesn't phase in gradually. You're either under a line or over it, and crossing by one dollar costs exactly the same as crossing by thousands.

It's per person. For a married couple, both are surcharged, so crossing a line roughly doubles in cost.

It's one part of a larger bill, which we size in what does healthcare actually cost in retirement.

For 2026, the surcharge begins above $109,000 of modified adjusted gross income for single filers and above $218,000 for joint filers. That figure is broader than the taxable income on your return, and we list what goes into it below. Below those levels you pay the standard Part B premium of $202.90 a month and no surcharge at all.

Here is the whole 2026 schedule. The surcharge amounts are per person, per month, on top of the standard premium.

Read the second row and the cost of a threshold becomes obvious. A single filer at $109,001 pays $95.70 a month more than one at $109,000, for a single dollar of income. A couple crossing the same line pays that twice.

Married and filing separately is treated differently and more harshly: if you lived with your spouse at any point in the year being measured, the surcharge starts above $109,000 and reaches the second highest tier almost immediately.

Every figure here is reset annually. Medicare publishes the current premiums and thresholds, and the Social Security Administration publishes the rules that apply to higher-income beneficiaries. Check both before planning around a number on this page.

Why it catches people who plan well.

The households most often surprised are the ones doing sensible things.

You do a large Roth conversion at 62 because it's the right move on its own terms. Two years later your premium reflects it. You sell a rental property, a concentrated position, or a business. The gain is a one-off; the surcharge arrives on schedule two years behind. You take a required withdrawal you didn't need. Same result.

None of those decisions were wrong. They each had a cost that shows up on a different bill, two years later, and nobody counted it at the time.

What counts as income here.

Broader than most people assume. The Social Security Administration sets out what goes into the figure; in practice it looks like this.

The last two rows are the levers. A qualified Roth withdrawal never counts, which is why conversions can pay off twice: they cost you a surcharge once, then remove those dollars from this calculation permanently. See is a Roth conversion worth it for you.

How to plan around it.

Know where the next line sits, every year. This is most of the work. If you're $4,000 under a line in December, a small deliberate action is worth more than a large clever one.

Sequence the big events. If you have a property sale and a conversion both in mind, doing them in the same year may cost one surcharge instead of two. Or the reverse, if one year would push you into a much higher tier. It depends on your numbers, which is exactly why it needs looking at.

Use the years before 63. Because of the lookback, income recognized before 63 never affects a Medicare premium. That makes the run-up to 63 the cheapest time for large conversions, and an argument for starting earlier than most people do.

Give from the IRA instead of from cash. A qualified charitable distribution goes straight from an IRA to a charity. It's excluded from income rather than deducted from it, so it never counts toward the surcharge. The IRS sets the eligibility rules and annual limit in Publication 590-B. For a retiree who gives and has withdrawals they don't need, this is often the single most efficient move available. See what's the smartest way to give to charity.

Watch your municipal bonds. If you hold them for tax efficiency, check whether the surcharge is quietly undoing part of the benefit.

The appeal nobody mentions.

The surcharge is based on a two year old return, which means it can be based on income you no longer have.

If your income has dropped because of a life-changing event, Social Security will reconsider. Qualifying events include retirement or reduced hours, the death of a spouse, marriage or divorce, loss of a pension, and loss of income-producing property. You file Form SSA-44, show the new income, and the surcharge can be recalculated or removed.

The year you retire is by far the most common case. A great many people simply pay for a year or two, never knowing they could have asked.

Nothing here sits on its own.

The surcharge isn't usually a large number against a substantial portfolio. What makes it worth attention is that it's one of several costs triggered by income level rather than bracket. Together, they make a dollar of income cost considerably more than the tax table suggests.

Plan around one line in isolation and you'll cross a different one. The whole set has to be looked at together. That's the point of tax planning, and the reason we treat your wealth as one connected system rather than a stack of separate bills.

Cosmos Wealth doesn't provide tax or legal advice. The 2026 thresholds, premiums, and qualifying events here are set by statute and regulation and change annually. Confirm current figures with your CPA or Social Security, or talk to us about where your own lines sit.