One Dollar of Extra Income Costs a Retired Couple $2,300 a Year in Medicare Premiums. These Funds Pay Without Crossing the Line

For a retired couple on Medicare, one extra dollar of taxable income can trigger roughly $2,297 a year in additional Part B and Part D premiums. That penalty lurks in high-yield covered-call funds like the JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI). JEPI is popular because it delivers a fat monthly check from an S&P 500 options overlay. The problem is where that check lands on your tax return. Most of JEPI’s distribution is ordinary income, which flows into Modified Adjusted Gross Income (MAGI) and pushes couples toward the first IRMAA cliff. Two ETF families sidestep that mechanism without sacrificing the income retirees bought JEPI for.

How $1 of Income Triggers a $2,300 Bill

The 2026 IRMAA table is unforgiving. A joint filer with MAGI at or below $218,000 pays the standard Part B premium. Crossing that line by one dollar puts both spouses into a tier that adds $284.10 per person per month to Part B, plus $14.50 apiece for Part D. Annualized, that is the $2,297 referenced in the headline. Municipal bond interest is added back into MAGI for this test, so the standard tax-free workaround falls short here (we cataloged the surcharges and coverage gaps most retirees miss in our free Medicare guide). The fix is a distribution that never counts as income in the first place.

Return-of-Capital Covered Calls: SPYI and QQQI

The NEOS pair, NEOS S&P 500 High Income ETF (CBOE:SPYI) and NEOS Nasdaq-100 High Income ETF (NASDAQ:QQQI), run a covered-call strategy similar to JEPI but structure distributions around Section 1256 options and return-of-capital classification. For QQQI’s fiscal year ended May 31, 2025, between 94.45% and 98.86% of each monthly distribution was classified as nontaxable return of capital. That portion reduces your cost basis rather than flowing through as ordinary income, so it does not add to MAGI in the year received.

The income is real. SPYI paid a trailing 12-month total of $6.87 per share against a current price of $53.74, and delivered a 16.16% one-year total return. QQQI paid $8.28 over the trailing 12 months, with monthly distributions in the $0.61 to $0.66 range this year. For a couple pulling $30,000 a year from SPYI, the ROC classification can keep most of that cash outside MAGI, which is precisely the difference between clearing the $218,000 threshold and not.

BOXX: Yield That Never Distributes

The Alpha Architect 1-3 Month Box ETF (CBOE:BOXX) attacks the problem from the other side. Instead of paying a monthly dividend, BOXX uses SPX box spreads to synthesize a T-bill-like return that accrues as price appreciation. Look at the distribution ledger. BOXX has made one distribution on record, $0.29059 on August 13, 2024. Everything else lives inside the share price. BOXX is up 2.74% year-to-date and 3.96% over the past year, currently trading at $118.25. If you sell shares in a low-income year, the gain is a long-term capital gain — which the IRMAA rules still count — but you control the timing rather than receiving forced monthly income.

JPMorgan’s ROC Series for Tax-Aware Retirees

Two JPMorgan siblings target return of capital: the JPMorgan Equity Premium Yield ETF (NASDAQ:ROCY) and the JPMorgan Nasdaq Equity Premium Yield ETF (NASDAQ:ROCQ). Each holds concentrated large-cap equity portfolios. ROCY holds NVIDIA at 8.19% and Apple at 6.57%, while ROCQ holds Micron at 6.64% and AMD at 4.69%. ROCQ’s forward annualized rate is $5.92 per share, and ROCY’s is $3.14, with distributions that vary sharply month to month, consistent with ROC-heavy accounting. Verify the distribution character on each fund’s 19a-1 notice, but the structure is designed with the same tax outcome in mind.

What You Give Up

Return of capital carries trade-offs. Each ROC dollar reduces your cost basis, so when you eventually sell, the gain is larger. For a retiree who holds the shares for life and passes them on with a stepped-up basis, that deferred tax bill may never arrive. For someone who spends down the position in ten years, ROC becomes tax deferral rather than permanent tax avoidance. BOXX has a different tradeoff: no income means no cash unless you sell, and the yield tracks short T-bills, so it will lag JEPI’s distribution rate in most years.

Making the Swap Without Triggering the Cliff You Are Avoiding

Inside an IRA or 401(k), the IRMAA math on distributions is irrelevant. In a taxable account, selling JEPI to buy SPYI or BOXX can itself generate the capital gain that pushes MAGI over $218,000, defeating the purpose. The cleanest path is to redirect new contributions and reinvested distributions into the tax-efficient replacement, then unwind the JEPI position over two or three tax years, using tax-loss harvesting elsewhere in the portfolio to offset gains. Coordinate with any Roth conversion plan, since conversions are also MAGI events.

What This Means for the Couple Near the Threshold

If your projected MAGI sits within $10,000 of $218,000, the character of your ETF income is worth more than an extra 50 basis points of yield. Moving even a portion of a JEPI sleeve into SPYI, QQQI, or BOXX can keep you under the tier, preserving the $2,297 you would otherwise hand back to Medicare next year. Run the numbers against your own tax projection before acting, since a Social Security COLA projected at 3.3% for 2027 will lift many households closer to the threshold on its own.

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