He Will Sell $100,000 in Stocks He Has Held for 20 Years. An $80,000 Capital Gain Will Count Toward His Medicare Premium Two Years Later
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Consider a 70-year-old retiree selling $100,000 in stock he bought 20 years ago for $20,000. The $80,000 gain gives him a cash reserve for retirement. Two years later, Social Security sends a letter raising his Medicare premiums because of that sale.
Most retirees never get that letter. The Center for Medicare & Medicaid Services (CMS) says income-related charges affect roughly 8% of people with Part B. A single filer with income at or below $109,000, or a joint filer at or below $218,000, pays the standard 2026 Part B premium of $202.90.
Why Medicare Counts an $80,000 Gain
Social Security sets the income-related monthly adjustment amount (IRMAA) using modified adjusted gross income (MAGI). MAGI is adjusted gross income from line 11 of Form 1040 plus tax-exempt interest from line 2a. Municipal bond interest escapes federal tax, but it still counts here. A realized gain in a taxable brokerage account goes straight into AGI.
Social Security generally uses the return from two years before the premium year, so 2026 premiums are generally based on 2024 tax return information. A sale he makes before December 31, 2026, will set his 2028 premiums. He also can’t spread the gain out after the fact. The IRS bars the installment method for publicly traded stock, so the entire gain counts in the year of the trade date.
Where $140,000 Lands on the 2026 IRMAA Table
Suppose he files single with $60,000 in other MAGI. Add the gain, and his income reaches $140,000. His actual premium year is 2028, so treat the 2026 rates below as examples.
| Single filer MAGI | Part B total premium (monthly, per person) | Part D charges only (monthly, per person) | Combined charges only (annual, per person) |
|---|---|---|---|
| Up to $109,000 | $202.90 | $0 | $0 |
| Over $109,000 through $137,000 | $284.10 | $14.50 | $1,148.40 |
| Over $137,000 through $171,000 | $405.80 | $37.50 | $2,884.80 |
He lands in the second level. Assuming he has Part D, his combined surcharges come to $240.40 a month, or $2,884.80 for the year. The painful part is that he missed the first level by just $3,000. With a gain of $77,000, he would have paid the $1,148.40 first-tier charges. That last $3,000 of gain costs him $1,736.40 in extra premiums.
If his income drops the following year, the higher surcharges generally last just one year. He also can’t appeal it. Form SSA-44 covers marriage, divorce, the death of a spouse, loss of income, and an employer settlement payment. A voluntary stock sale falls outside that list, one of several IRMAA pitfalls described in a free Medicare guide.
Filing status moves the lines. At $140,000, joint filers sit well below the $218,000 joint threshold. The flip side affects survivors. A widow who files single after her spouse dies faces the $109,000 line on nearly the same household income.
Why the Account Holding the Stock Matters
Selling shares inside a traditional or Roth IRA doesn’t trigger capital gains tax. Taxes generally come when he withdraws money from a traditional IRA. A $100,000 withdrawal from a pretax account would add the full amount to MAGI, more than the $80,000 brokerage gain. Qualified Roth withdrawals are tax-free and won’t push him into a higher Medicare bracket.
What He Should Check Before Selling
- Split the sale between December and January. If his cost basis is spread equally across his shares, selling $50,000 in December 2026 makes a $40,000 gain and puts his 2026 MAGI at $100,000. Selling the other half in January 2027 produces the same result for 2027. Both years fall below the 2026 threshold of $109,000. At today’s rates, he avoids the $2,884.80 annual surcharge.
- Harvest losses in the same tax year. Capital losses offset gains dollar for dollar. If losses exceed gains, he can generally deduct up to another $3,000 against other income. Just $3,000 of realized losses brings his MAGI down to $137,000 and back into the first level.
- Check the basis on every lot before choosing shares. Use Form 1099-B and your broker’s lot detail. Shares bought at higher prices produce smaller gains for the same cash. Add up every other income source, including muni interest, so you know your starting MAGI before placing the trade.
Medicare counts his $80,000 taxable gain. The $20,000 he originally invested comes back to him without adding to MAGI. Size the sale against the $109,000 and $137,000 lines before the trade date sets his 2028 premium.
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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.
