# The Medicare surcharge that bills you for a tax return you filed two years ago

By James Ustby, CFP®, APMA®. Published 2026-09-07, updated 2026-10-16. Canonical URL: https://jamesustby.com/articles/nest-egg-medicare-irmaa-two-year-lookback

> Medicare looks at the return you filed two years ago. For 2026, that is your 2024 income, and the line has no ramp.

*This article first appeared in The Nest Egg, my daily email, on 2026-09-07. [Read the original issue](https://retirement-wealth.beehiiv.com/p/medicare-irmaa-two-year-lookback). It is educational, not a recommendation for you. The household in it is a hypothetical example, and market figures are as of the date shown and will have changed.*

Medicare sets your premium from the tax return you filed two years earlier, so your 2026 Part B and Part D premiums are based on your 2024 income.

| Medicare premium year | Income year used |
|---|---|
| 2026 | 2024 federal return |
| 2027 | 2025 federal return |
| 2028 | 2026 federal return |

You can estimate your own tier with the [IRMAA calculator](https://jamesustby.com/irmaa-calculator). If a big income year is coming, such as the year you sell a business, plan for the premium two years later; see [what to do with the money after you sell your business](https://jamesustby.com/articles/what-to-do-after-selling-business).

**THE LINE**

Medicare sets your monthly premium using the tax return you filed two years earlier, and the income thresholds are cliffs, not ramps.

**THE SETUP**

Sometime in November, the Centers for Medicare and Medicaid Services announces next year's Medicare premiums. Sometime after that, Social Security mails a notice telling certain people their premium will be higher than the standard one. Almost everyone who gets that notice is surprised by it, because the income that triggered it happened two calendar years ago, in a year they have stopped thinking about. If you sold a rental property in 2024, or converted an IRA, or took a lump sum, the bill for it arrives in your 2026 Medicare premium.

**THE MECHANISM**

The surcharge is called the Income-Related Monthly Adjustment Amount, or IRMAA. It works on a two-year lookback. Your 2026 premium is set by your modified adjusted gross income from your 2024 federal return, because 2024 is the most recent return the IRS has on file when CMS builds the 2026 premium schedule.

The 2026 standard Part B premium is $202.90 a month, and the 2026 annual Part B deductible is $283. If your 2024 modified adjusted gross income was at or below $109,000 filing single, or $218,000 filing jointly, you pay that standard premium and nothing more. Above it, you pay the standard premium plus a surcharge, and the surcharge has five tiers.

Here is the part that surprises people. The tiers are not phased in. There is no blend, no proration, no partial credit for being barely over. One dollar of modified adjusted gross income above $218,000 for a couple moves that couple from the standard premium to the first surcharge tier for all twelve months of 2026. The dollar itself is taxed at your ordinary rate like any other dollar. The surcharge is a separate charge, set for the whole year, triggered by the dollar.

Modified adjusted gross income for this purpose is your adjusted gross income plus tax-exempt interest. Municipal bond interest, which is invisible on the taxable income line, is fully visible here.

**THE NUMBER**

Take a married couple, both on Medicare, whose 2024 modified adjusted gross income landed at $218,001. One dollar over the first threshold.

The 2026 first-tier Part B surcharge is $81.20 per person per month.

* $81.20 times 12 months times 2 people equals $1,948.80.

The same tier carries a Part D surcharge of $14.50 per person per month.

* $14.50 times 12 months times 2 people equals $348.00.
* Total 2026 cost of that one dollar: $2,296.80.

That is the price of the dollar, and it is charged whether the couple's 2026 income is high, low, or zero. Their 2026 circumstances are irrelevant. The 2024 return decided it.

Note also what the second tier does. A couple crossing $274,000 in 2024 pays a Part B surcharge of $202.90 each per month, an amount exactly equal to the entire standard premium, plus $37.50 each for Part D.

**THE SOURCE**

The premium and surcharge amounts come from the annual CMS notice of Medicare Part A and Part B premiums, deductibles and coinsurance, published each fall. The tier thresholds and surcharge amounts appear in the SSA program manual at POMS HI 01101.020. The two-year lookback and the use of modified adjusted gross income are set in the Social Security Act at 42 U.S.C. section 1395r(i). Social Security administers the determination and issues the notice.

One caution on next year. The 2027 IRMAA brackets have not been published. They normally appear in November 2026, and any 2027 figure quoted before then is an estimate.

**THE CHECK**

Find your 2024 Form 1040. Add line 11, your adjusted gross income, to line 2a, your tax-exempt interest. That sum is the number CMS used to set your 2026 premium. Compare it to $109,000 filing single or $218,000 filing jointly.

Separately: if your income has since dropped because of a specific life event, such as retirement, the death of a spouse, divorce, or the loss of a pension, Social Security has a form for that. It is Form SSA-44, "Medicare Income-Related Monthly Adjustment Amount, Life-Changing Event," and it asks Social Security to use a more recent year instead. The form lists the eight events that qualify. A large one-time capital gain is not one of them.

**WHAT THIS IS NOT**

This explains how a premium is calculated. It is not advice about your income, your accounts, or whether to file Form SSA-44.

**ONE MORE THING**

The two-year lag has one quiet mercy in it. You always know your IRMAA year before it happens, because the return that sets it is already filed.

**FREE DOWNLOAD.** [The Four Cliffs (2026 Edition)](https://retirement-wealth.beehiiv.com/p/the-four-cliffs): four places in the tax code where one dollar of income costs far more than one dollar, with the exact 2026 line for each, the arithmetic shown, and a one-page worksheet. Free, no payment and no card.

Retirement Wealth sends one number like this, with its primary source, once a week. Free, and there is nothing to buy in it. Subscribe at retirement-wealth.beehiiv.com. No calls, no pitches, no appointment.

*Educational material. Not tax, legal or investment advice. Confirm every figure against the primary source before acting on it.*

## Questions people ask next

### Can I appeal IRMAA if my income dropped?

Yes, if the drop came from a life-changing event. Social Security lists marriage, divorce, the death of a spouse, loss of income (such as stopping work) and an employer settlement payment, and you report it on Form SSA-44 to ask that a more recent year's income be used. A one-time capital gain from selling an asset is not a qualifying event.

### What year's income is used for 2027 Medicare premiums?

Your 2025 federal tax return. Medicare uses the return filed two years before the premium year, so 2027 premiums look back to 2025 modified adjusted gross income, and 2028 premiums look back to 2026.

## Sources

- [The Nest Egg, original issue](https://retirement-wealth.beehiiv.com/p/medicare-irmaa-two-year-lookback)
- [Social Security Administration, Request to lower an Income-Related Monthly Adjustment Amount (IRMAA)](https://www.ssa.gov/medicare/lower-irmaa)
- [Social Security Administration, Form SSA-44, Medicare Income-Related Monthly Adjustment Amount, Life-Changing Event](https://www.ssa.gov/forms/ssa-44.pdf)

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Author: James Ustby, CFP®, APMA®, Wealth Advisor, LPL Financial, Durham and Chapel Hill, North Carolina. This material is for general information only and is not intended to provide specific advice or recommendations for any individual. Examples are hypothetical and for illustration only. Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA / SIPC. Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP® and CERTIFIED FINANCIAL PLANNER® in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.