Medicare beneficiaries filing 2025 tax returns are setting the income baseline that the Social Security Administration will use to calculate premium surcharges two years from now. Under SSA’s standard two-year lookback rule, the agency pulls modified adjusted gross income data from the IRS for the tax year two years before the premium year, meaning 2025 returns will drive 2027 determinations. For anyone whose income drops sharply in 2026 due to retirement, divorce, or a spouse’s death, the gap between past earnings and present reality creates a billing problem that can only be fixed through a formal appeal.
How the two-year lookback sets 2027 surcharges
The income-related monthly adjustment amount, known as IRMAA, adds a surcharge to both Part B and Part D premiums for beneficiaries whose income exceeds certain thresholds. The legal authority for these income-based adjustments sits in 42 U.S. Code Section 1395r, which directs the calculation of Part B premiums and the income tiers that trigger higher payments.
SSA defines the income measure as adjusted gross income plus tax-exempt interest, a formula that captures not just wages and investment gains but also municipal bond income that would otherwise be excluded from federal taxes. The agency requests this MAGI data from the IRS for the tax year two years prior to the premium year. That means 2027 premium letters will reflect whatever appears on a beneficiary’s 2025 federal return, regardless of what happens to that person’s income in 2026 or early 2027.
Once SSA completes its determination, it sends beneficiaries an IRMAA letter stating the surcharge amount. That letter serves as the initial determination, and beneficiaries who disagree must take specific steps to challenge it.
Retirement and divorce in 2026 will collide with 2025 income data
The core tension falls on people whose financial circumstances change after their 2025 return is filed but before 2027 premiums take effect. A high earner who retires in mid-2026, for example, will still show a full year of peak income on the 2025 return. SSA’s automated system has no way to know that person’s 2026 and 2027 income dropped significantly. The same applies to someone who divorces in 2026 and shifts from a joint return with combined high income to a single filer with far less.
SSA recognizes this mismatch and allows beneficiaries to file Form SSA-44 to request a lower IRMAA after qualifying life-changing events. Those events include work stoppage or retirement, marriage, divorce, and death of a spouse, according to SSA operational policy. But the burden falls entirely on the beneficiary. Without filing SSA-44 and providing documentation of the changed circumstances, the surcharge stands.
