A 66-year-old HVAC contractor spent one year winding down the shop he had run for three decades. He sold the business to a younger competitor, auctioned off three service trucks and a bay full of refrigerant recovery machines, and handed over a client list built across a career. He paid the tax bill, took his wife to Portugal, and enrolled in Medicare on time. Two years after the sale, the Social Security Administration mailed him a Part B premium notice that looked like it belonged to someone still earning seven figures.
His retirement income stayed flat. His 2024 tax return spiked.
Why the Bill Arrived Two Years Late
Medicare generally uses a two-year lookback to determine the Income-Related Monthly Adjustment Amount, known as IRMAA. His 2026 Part B and Part D premiums were based on his 2024 modified adjusted gross income (MAGI). Sell a business in 2024, and the surcharge can land in the mailbox in 2026, long after the proceeds have been spent, reinvested, or spread across a Portugal itinerary.
The trigger is MAGI: adjusted gross income (AGI) on Form 1040, line 11, plus tax-exempt interest on line 2a. Municipal bond interest that feels tax-free still counts for IRMAA. Gain from goodwill and the client list, along with taxable gain or depreciation recapture on equipment sold above its adjusted basis, flows into AGI. For a tradesman whose retirement plan was the business, the sale year may be the highest-income year of his life, and Medicare notices two Januarys later.
The 2026 Numbers
The 2026 standard Part B premium is $202.90, an increase of $17.90 from $185.00 in 2025. IRMAA affects roughly 8% of people with Medicare Part B. Beneficiaries below the first threshold pay the standard premium and no surcharge, which is most of the country.
Above the first threshold, the ladder climbs fast. The CMS 2026 fact sheet lays out the full Part B tiers:
| 2026 MAGI (single) | 2026 MAGI (joint) | Part B IRMAA (monthly, per person) | Total Part B premium (monthly, per person) |
|---|---|---|---|
| Up to $109,000 | Up to $218,000 | $0.00 | $202.90 |
| $109,001 to $137,000 | $218,001 to $274,000 | $81.20 | $284.10 |
| $137,001 to $171,000 | $274,001 to $342,000 | $202.90 | $405.80 |
| $171,001 to $205,000 | $342,001 to $410,000 | $324.60 | $527.50 |
| $205,001 to under $500,000 | $410,001 to under $750,000 | $446.30 | $649.20 |
| $500,000 or more | $750,000 or more | $487.00 | $689.90 |
Part D adds its own surcharge on top, running from $14.50 per month at the first tier up through the higher brackets. A married contractor whose 2024 sale pushed the couple past the top joint threshold pays the top Part B premium and the top Part D adjustment, per person, for all of 2026. The 2026 Social Security cost-of-living adjustment of 2.8% disappears into that surcharge before it reaches the checking account.
The One Escape Hatch, and Its Limits
Form SSA-44 lets a beneficiary ask Social Security to use a more recent, lower income figure after a qualifying life-changing event. The list includes marriage, divorce, death of a spouse, work stoppage, work reduction, loss of income-producing property because of circumstances beyond the owner’s control, loss of pension income, and certain employer settlement payments tied to a closure, bankruptcy, or reorganization.
A contractor who sold the business and stopped working can file SSA-44 citing work stoppage, provide documentation of the sale and retirement, and ask SSA to base his 2026 premiums on his estimated 2026 income instead of 2024. That can work when the work stoppage produces a large enough drop in current MAGI to reduce or eliminate IRMAA.
What SSA-44 cannot do is erase the sale year on its own merits. A voluntary income spike without an accompanying qualifying event does not count. Neither does a Roth conversion or home sale by itself. Filing on that basis alone is unlikely to succeed.
What to Do Before the Handshake
The best time to manage the Medicare fallout is before the sale price, payment schedule, and retirement date are locked in.
- Model the sale year against the IRMAA ladder before signing. If an installment sale, an earnout, or a two-year close would keep MAGI under the next threshold, the premium savings compound across both spouses and both Parts B and D.
- File SSA-44 with the retirement letter, not without it. Bundle the bill of sale, the final Schedule C, and a signed statement that active work has ended. Work stoppage is the qualifying event; the sale is the documentation.
- Watch the survivor bracket. Joint thresholds are roughly double the single ones. When one spouse dies, the survivor files single on the same underlying income and can jump one or two IRMAA tiers with no change in cash flow.
Selling the business is the payday a tradesman spends thirty years building. Medicare treats it like any other line on the 1040. Timing the exit is the last job on the punch list.
Contact [email protected] for any questions or corrections.
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