Her Roth Paid for the Kitchen and Medicare Never Saw a Dollar. Her Traditional IRA Paid for the Roof, and Medicare Saw All of It
She paid for two major home renovations from her retirement accounts in the same year, and Medicare only noticed one of them. The account she chose to fund each project made all the difference in her 2026 premiums.
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Picture a single 68-year-old homeowner in 2024. Her kitchen needs a full renovation, and her roof is failing. She pays for the kitchen with a $40,000 withdrawal from a Roth IRA she opened more than a decade ago. She pays for the roof with a $30,000 withdrawal from a fully pretax traditional IRA. Her usual modified adjusted gross income (MAGI) sits around $100,000.
Seventy thousand dollars left her retirement accounts in one year. Medicare saw thirty thousand of it, and the difference will show up in her 2026 Part B and Part D premiums. If that sounds like it could describe your own year, or a year you are planning, the mechanic below is the one that matters. If your income is comfortably under the first IRMAA threshold and you do not expect a large one-time withdrawal, you are outside the roughly 8% of Part B beneficiaries the surcharge touches.
Why Medicare Never Saw the Kitchen Money
A qualified Roth IRA distribution is excluded from gross income under IRC §408A(d). Our homeowner is past 59½ and has satisfied the Roth’s five-year rule, so the full $40,000 comes out tax-free. It never lands on Form 1040 as income.
That matters because the IRMAA calculation starts from adjusted gross income. Social Security’s own guidance, POMS HI 01101.010, defines MAGI for IRMAA as AGI plus tax-exempt interest. A qualified Roth distribution enters neither line. Her kitchen cost $40,000, and her MAGI stayed at $100,000.
Why Medicare Saw the Roof Money
A traditional IRA holds pretax dollars. Absent after-tax basis, every dollar out is ordinary income, reported on the tax return whether she spends it on a roof, a cruise, or the electric bill. Her $30,000 withdrawal pushes her 2024 MAGI from $100,000 to $130,000.
Social Security reads that 2024 return two years later, when it sets her 2026 Medicare premiums. The home improvements may raise her cost basis for a future sale, as detailed in IRS Publication 523, but nothing about spending the money on the house erases the income in the year it came out.
One Withdrawal Crossed the IRMAA Tier
Run both scenarios against the CMS 2026 single-filer data.
- With only the qualified Roth withdrawal, her MAGI stays at $100,000, below the $109,000 first-tier line. Her 2026 Part B premium stays at the standard $202.90 per month, and her Part D carries no IRMAA add-on.
- Add the $30,000 traditional IRA distribution and MAGI becomes $130,000. That drops her into the first IRMAA bracket, which covers single MAGI above $109,000 through $137,000. Her Part B premium rises to $284.10 a month, and her Part D picks up an extra $14.50. Over 12 months, the traditional IRA withdrawal alone adds $1,148.40 to her 2026 Medicare tab.
Same Purchase, Different Line on the Return
Medicare looks at MAGI: adjusted gross income, plus tax-exempt interest. The project the money funded, a range hood or a shingle, is irrelevant. A qualified Roth withdrawal stays outside that number. A taxable traditional IRA withdrawal goes right into it. The account supplying the cash matters more than the project receiving it.
Two Boundaries Worth Naming
Not every Roth withdrawal is invisible. A distribution that fails the age or five-year test can put earnings back on the return. And a Roth conversion is generally taxable to the extent it contains pretax money. The later qualified withdrawal escapes MAGI, but the conversion itself can spike IRMAA two years out. Form SSA-44 will not reverse that spike, because a voluntary conversion is not one of the life-changing events the form covers.
What to Do Before You Sign the Contractor’s Check
Before funding any large one-time expense out of retirement accounts, run both source options against this year’s MAGI. If a traditional IRA withdrawal would cross the $109,000 single (or $218,000 joint) line, price the surcharge two years out and compare it to funding the purchase from a qualified Roth, taxable savings, or a home equity line of credit (HELOC). IRMAA is one of the tax traps that can silently drain retirement accounts, all charted in our free tax trap map.
The kitchen and roof added value to the home. Only the traditional IRA money used for the roof left a mark on the return Medicare read. For her next home project, she may want to choose the account with both the contractor’s bill and future Medicare bill in sight.
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Gerelyn Terzo is the author of dividend investing handbook "Dividend Investing Strategies: How to Have Your Cake & Eat It Too." A veteran financial journalist, she covers agri-finance for outlets like Global AgInvesting and the broader stock market and personal finance for 24/7 Wall Street. She began at CNBC and later helped launch Fox Business in New York. Gerelyn currently resides in Woodland Park, Colorado and dabbles in nature photography as a hobby.
