Retirees who converted a traditional IRA to a Roth account or sold a home at a large gain in 2024 are now facing higher Medicare premiums in 2026, even if their regular income never changed. The Social Security Administration uses modified adjusted gross income from federal tax returns filed two years earlier to set the Income-Related Monthly Adjustment Amount, or IRMAA, a surcharge added on top of standard Part B and Part D premiums. That two-year lookback means a single spike in reported income can trigger months of elevated costs long after the money has been spent or reinvested.
How the two-year MAGI lookback catches retirees off guard
The mechanics are straightforward but easy to overlook during tax planning. SSA pulls a beneficiary’s MAGI from the IRS tax return for the year two years before the premium year, according to the Social Security Handbook. For 2026 premiums, that means 2024 tax data controls the calculation. A retiree living on $40,000 a year in pension and Social Security income who also executed a $200,000 Roth conversion in 2024 would show a MAGI well above the lowest IRMAA threshold, regardless of what that person actually earns in 2026.
Roth conversions create this exposure because the IRS treats the converted amount as taxable income in the year it is received, as described in IRS Publication 590-B. Home sales can produce a similar effect. Under 26 U.S. Code Section 121, single filers can exclude up to $250,000 in gain and joint filers up to $500,000, but any taxable gain above those limits flows directly into MAGI and feeds the IRMAA formula.
The result is a timing mismatch. A retiree whose ongoing income is modest can land in the same IRMAA tier as someone earning six figures every year, simply because of a one-time financial event that happened to fall in the lookback window.
2026 IRMAA tiers and the real cost of a single spike
The CMS 2026 fact sheet sets the standard monthly Part B premium at $185 for most enrollees. IRMAA adds surcharges on top of that figure in graduated tiers based on MAGI, and the same fact sheet includes the 2026 Part D IRMAA amounts. At the highest income brackets, the combined monthly surcharge for Parts B and D can exceed $500 per person, turning a single-year income event into thousands of dollars in added annual premium costs spread across twelve months.
The Congressional Research Service has tracked these premium structures over time. CRS Report R40082 summarizes Part B premiums and IRMAA with tables and citations to CMS Federal Register notices, documenting how the surcharge tiers have expanded and adjusted for inflation since the program’s creation. The report confirms that IRMAA is not a marginal add-on but a distinct, tiered surcharge that can multiply a beneficiary’s base premium by several times.
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