$1 Over $109,000 on Your 2024 Return Costs $974 in Medicare Surcharges in 2026. Medicare Doesn’t Round Down
A single dollar of extra income on your 2024 tax return can trigger a Medicare surcharge that haunts you two years later, and most retirees never see it coming until the bill arrives.
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Two retirees file nearly identical 2024 tax returns. One reports modified adjusted gross income of exactly $109,000. The other reports $1 more. In 2026, the first pays only the standard Part B premium of $202.90 a month. The second pays that premium plus a surcharge that adds up to $974 over the year in Part B alone. Part D then adds a separate surcharge on top of that.
Medicare’s income-related monthly adjustment amount (IRMAA) has no phase-in and no proration. Go over the line by a dollar and you pay the full first-tier charge for all 12 months. Only roughly 8% of Part B enrollees pay any surcharge, so a single filer whose income is well below six figures has nothing to worry about here. The people this rule hits hardest are single filers whose income sits one Roth conversion away from the line.
Your 2026 Premium Was Set by Your 2024 Return
Social Security sets IRMAA using the most recent tax data the IRS can provide. Usually that is the return from two years before the premium year. SSA’s operating manual states that 2026 premiums are generally based on 2024 tax return information. That means your 2025 return, already filed, sets your 2027 premiums. The 2026 return you file next spring will set your 2028 premiums.
That two-year delay is why the single dollar stings. Whatever pushed you over happened two years ago, often before Medicare was even on your mind. By the time the surcharge notice comes, nothing about that year can change.
Four Income Sources That Push You Over Without Warning
SSA defines MAGI as adjusted gross income (line 11 of Form 1040) plus tax-exempt interest income (line 2a). Anything that increases either line counts toward the threshold.
- Roth conversions. The IRS says conversion amounts are includible in your gross income in the year you convert. If you size a conversion to fill a tax bracket, you can exceed the IRMAA line by a few hundred dollars and owe the full $974.
- Required minimum distributions. RMDs start at age 73 for today’s retirees, and the required amount grows as the IRS life-expectancy factor shrinks. You have to take the withdrawal whether you need the cash or not.
- Capital gains. Rebalancing, a home-sale gain above the exclusion and year-end mutual fund distributions all count toward AGI. Fund distributions catch the most people by surprise because you never placed a trade.
- Tax-exempt interest. Municipal bond interest avoids federal income tax, but SSA adds it back into MAGI. Switching to munis to cut your tax bill can still trigger the surcharge.
A change in filing status can do the same thing. After a spouse dies, the survivor eventually files as single. The survivor then faces the $109,000 individual line on about the same household income that used to fit well under the joint threshold. The income stayed the same, but the threshold dropped.
Your Options Depend on Where You Stand
If You Can Still Shape Your 2026 Return
Your 2026 income is still adjustable until December 31, and it sets your 2028 premiums. Pull together your year-to-date pay stubs and brokerage statements, then estimate your full-year MAGI. Include municipal bond interest and your funds’ projected capital gain distributions, which many fund companies post in November. Do any Roth conversion last, in December, once your other income is known.
If you are 70½ or older, a qualified charitable distribution is generally a nontaxable distribution that also count[s] towards your required minimum distribution, so it keeps that money out of AGI. Medicare hasn’t published the 2028 threshold yet, so leave yourself a buffer rather than aiming right at the 2026 line.
If You Already Have a 2026 Notice
Your 2024 return can’t be changed. SSA will only recalculate for a qualifying life-changing event: death of spouse, marriage, divorce or annulment, work reduction, work stoppage, loss of income-producing property, loss of employer pension income, or receipt of an employer payment. A Roth conversion, capital gain or home sale doesn’t qualify, no matter how much it increases your MAGI.
If you retired after 2024 and your income has dropped, file Form SSA-44, Medicare Income-Related Monthly Adjustment Amount, Life-Changing Event. Attach your employer’s retirement letter and an estimate of your current-year income. You can upload it through your SSA account or fax or mail it to a local office. If you amended your 2024 return to fix an error, call SSA at 800-772-1213 and ask for a new determination based on the amended return.
Run a MAGI Check Every October
The practice that keeps you under the line is a once-a-year projection in October, while you can still change the year’s income. Add up wages, pensions, IRA withdrawals, the taxable part of your Social Security, capital gains and tax-exempt interest. Compare the total with the most recent threshold, and keep in mind that this year’s return sets your premiums two years from now. If you’re within one conversion or one fund distribution of the line, plan your December moves around that number (this drop is one of nine IRS rules that quietly drain retirement accounts, all charted in our free tax trap map).
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Jake has been been working in financial media for almost 15 years. He focuses on all things personal finance for 24/7 Wall St. with high hopes to educate and entertain. Most recently, Jake spent 12 years working various roles at The Motley Fool. He started copy editing fool.com content, worked on premium and marketing campaigns, and helped launch The Ascent, a personal finance brand.
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