Dentist Sells His Practice for $1.2 Million. Nobody Told Him It Means Eight Years of Medicare Surcharges.

Picture a dentist who built a practice over three decades. He sold it at age 66 for $1.2 million structured as an eight-year installment note, and walked into retirement thinking he had done the smart thing. His CPA told him the installment structure would spread the capital gain, soften the tax hit, and keep him out of the top bracket. All true.

What nobody flagged is that the same income stream that smooths his tax bill also parks his household modified adjusted gross income above a Medicare threshold every single year the note pays out. This a common blind spot in small-business exits. The White Coat Investor community has written extensively about dentists selling to DSOs and private equity rollups since at least 2024, and the tax planning around those deals almost always centers on capital-gains treatment. Medicare IRMAA rarely enters the conversation until the first surcharge letter arrives.

IRMAA, the Income-Related Monthly Adjustment Amount, is a cliff. Cross a threshold by a single dollar and you owe the full tier for the year. For a married couple filing jointly in 2026, the standard Part B premium is $202.90 per month per spouse. Cross $218,000 in MAGI and each spouse’s Part B jumps by $81.20 per month, plus another $14.50 per month on Part D. Cross $274,000 and the Part B adjustment climbs to $202.90 per month on top of the base, with Part D adding $37.50 per month. Both spouses pay separately. Social Security uses a two-year lookback, so the income you report this year sets your premiums two years from now.

Stack that surcharge across two people and eight years of installment payments and the arithmetic gets ugly. The lifetime cost can run north of $20,000 for a couple who never realized they had a choice.

Take the lump-sum path. One enormous capital-gain year pushes MAGI into the top IRMAA tier. Two years later, premiums spike hard. Two years after that, they reset to normal. The pain is concentrated and finite.

Now the installment path. Each year’s principal-plus-interest lands somewhere in the low six figures on top of Social Security, dividends, and required minimum distributions. If that annual total keeps clearing $218,000 or $274,000, the couple pays a surcharge every year of the note.

Three Levers That Change the Outcome

1. Size the payment to sit just under a threshold. If a slightly smaller annual principal payment keeps MAGI at $217,000 instead of $220,000, that headroom saves both spouses the full first-tier surcharge for the year. Stretch the note to nine or 10 years if needed.
2. Front-load the down payment before Medicare enrollment. IRMAA uses a two-year MAGI lookback. A larger up-front payment in the pre-Medicare window, followed by smaller installments once enrolled, can pull years of surcharges off the table entirely.
3. Route a slice through a charitable remainder trust. A CRT lets you offload part of the gain, generate an income stream, and keep the taxable portion of each year’s inflow smaller. For sellers planning to give to charity anyway, this can be a way to knock MAGI below a threshold without shrinking lifetime spending.

What to Do Before You Sign

The most important variable to evaluate is the projected MAGI in each year the note pays out, measured against the IRMAA thresholds that will apply in that year. Premiums also drift up annually, with the 2027 Social Security COLA tracking near 3% and Medicare rising in parallel, so a plan built on today’s numbers needs a small cushion.

A fee-only advisor who models both the tax bill and eight years of stacked IRMAA surcharges for both spouses will pay for themselves several times over. IRMAA is only one of the premium traps sitting inside Medicare, and we cataloged the rest, coverage gaps included, in a free Medicare guide here. Do that modeling before you sign, not after the first premium letter arrives.

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