# One dollar over $274,000 costs $3,472.80. By James Ustby, CFP®, APMA®. Published 2026-09-16. Canonical URL: https://jamesustby.com/articles/nest-egg-one-dollar-over-274-000-costs-3-472-80 > Medicare reads the return you filed two years ago and the brackets are cliffs. Yesterday's conversion just bought a 46.2% marginal rate on its last... *This article first appeared in The Nest Egg, my daily email, on 2026-09-16. [Read the original issue](https://retirement-wealth.beehiiv.com/p/one-dollar-over-274-000-costs-3-472-80). 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.* *Every figure below names its document. Every calculation is shown. Nothing here is a forecast.* Good morning. Wednesday is when most people finally open the thing they flagged on Monday and never got to. This is the second half of a bill we started pricing yesterday, and it is the larger half. ## In today’s issue **The tape.** Every index closed lower again, WTI crude jumped 4.38% to $105.83, and the ten-year crossed 5%. Two minutes. **A surcharge with no ramp.** Medicare sets your premium from the tax return you filed two years ago, and the brackets are cliffs. One dollar over $274,000 on a joint return costs a couple $3,472.80 a year. Four minutes. **What yesterday’s conversion really cost.** The $150,000 Roth conversion carried $33,920 of income tax, $1,630.20 of surtax, and $5,769.60 of Medicare surcharge. All in, 27.5%. The last $18,900 of it was taxed at 46.2%. Three minutes. **One more thing.** There are eight ways to appeal an IRMAA bill. A Roth conversion is not one of them. One minute. ## The tape Closing levels and session changes, CNBC US markets, September 15, 2026. Gold and WTI crude are front-month futures settlements. ## The story Almost every threshold in the tax code is a ramp. You cross into the 24% bracket and only the dollars above the line pay 24%. The dollar before the line and the dollar after it are taxed almost identically. The Medicare income-related monthly adjustment amount is not built that way. It is a set of cliffs, and the whole surcharge changes the moment you cross one. The Centers for Medicare and Medicaid Services published the 2026 amounts. For a joint return, the Part B surcharge is $0 up to $218,000 of modified adjusted gross income, $81.20 a month in the next band, and $202.90 a month once income passes $274,000. Part D adds $0, then $14.50, then $37.50 on the same lines. The standard Part B premium itself is $202.90 a month, so the third band is exactly double the standard premium. Those are per person. A married couple where both are enrolled pays both. Annualized for a couple, the bands run $0, then $2,296.80, then $5,769.60, then $9,240.00, then $12,710.40. **The step from the second band to the third is $3,472.80, and it is triggered by one dollar.** A joint return at $274,000 pays $2,296.80. A joint return at $274,001 pays $5,769.60. And the return it reads is not this year’s. The Social Security Administration states it plainly: to set 2026 amounts, it uses the most recent return the IRS has provided, generally the return filed in 2025 for tax year 2024. Two years back. ## The position The same couple from yesterday. Both on Medicare, filing jointly. $1,600,000 in a taxable account throwing off $80,000 a year, $1,200,000 in a traditional IRA, and $62,900 of taxable Social Security in adjusted gross income. Yesterday they converted $150,000 to a Roth, which took their modified adjusted gross income from $142,900 to $292,900. Yesterday we priced what that did to their income tax. Today we price what it does to their Medicare premium two years later. ## The arithmetic A note on honesty first. The 2028 thresholds do not exist yet. These bands are indexed and will move. We are not going to invent a 2028 number, so the arithmetic below runs the couple’s income through the **published 2026 bands**, which is the only table anyone can actually check. **Where the conversion lands them.** MAGI of $292,900 sits in the band above $274,000 and at or below $342,000. Part B surcharge: $202.90 per month Part D surcharge: $37.50 per month Combined: $240.40 per month, per person $240.40 x 2 people x 12 months = **$5,769.60** **Where they would have landed without it.** MAGI of $142,900 is below $218,000. Surcharge: **$0.** **Now add up what the conversion actually cost.** Income tax on the conversion: $33,920.00 Net investment income tax it triggered: $1,630.20 Medicare surcharge it triggered: $5,769.60 **Total: $41,319.80 on $150,000, or 27.5%.** They were told they were converting in the 24% bracket. **The part that should change the plan.** Their income before converting was $142,900. The third Medicare band starts at $274,000. That leaves $131,100 of headroom. They converted $150,000, which is $18,900 past the headroom. That $18,900 is what moved them over the cliff, so the entire $3,472.80 step is attributable to it. $3,472.80 / $18,900 = 18.4% 24% ordinary + 3.8% surtax + 18.4% Medicare = **46.2%** The last $18,900 of that conversion was taxed at 46.2%. The first $131,100 was taxed at roughly 23%. Same conversion, same year, same couple. 2026 income-related monthly adjustment amounts for Part B and Part D: Centers for Medicare & Medicaid Services. Annual figures are both monthly adjustments added, times two people, times twelve months. ## What the four of them would say **The portfolio manager.** Nothing in the market caused this. The surcharge is set by a number on a tax return, and the tax return is set by decisions made in December. This is the one part of the bill that is entirely inside your control and nowhere in your portfolio. **The CPA.** The planning unit is the headroom, not the conversion. Take the top of the band you intend to stay in, subtract every other dollar of modified adjusted gross income including the taxable portion of Social Security, and convert the remainder. The number that comes out is almost never round. **The financial planner.** Two years of lag means the bill for a 2026 conversion arrives in 2028, which is usually one year after somebody has already forgotten they converted. It also means a single large year, a property sale or an inherited IRA distribution, raises premiums for exactly one year and then falls off. **The estate attorney.** Watch what happens to these same bands when one spouse dies. The survivor files a single return, and the single thresholds are half the joint ones. The income does not halve. ## One more thing You can appeal an income-related monthly adjustment amount. Form SSA-44, titled Medicare Income-Related Monthly Adjustment Amount, Life-Changing Event, lists exactly eight qualifying events: marriage, divorce or annulment, death of a spouse, work stoppage, work reduction, loss of income-producing property, loss of pension income, and an employer settlement payment. Read that list again and notice what is missing. A Roth conversion is not a life-changing event. Neither is selling a house, harvesting a gain, or taking a large distribution on purpose. The appeal exists for income you did not choose. There is no appeal for income you did. ## Tomorrow The estate attorney’s last line is tomorrow’s letter. When one spouse dies, the survivor files single, and every threshold in this letter and yesterday’s is cut roughly in half while the income is not. We will price what that does to the same household. ## Sources 2026 Part B and Part D income-related monthly adjustment amounts, the $202.90 standard premium and the $283 deductible: [Centers for Medicare & Medicaid Services](https://www.cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles). The two-year lookback and the appeal process: [Social Security Administration](https://www.ssa.gov/benefits/medicare/medicare-premiums.html). The eight qualifying events: [Form SSA-44](https://www.ssa.gov/forms/ssa-44.pdf). The 3.8% surtax: [26 U.S.C. 1411](https://www.law.cornell.edu/uscode/text/26/1411). 2026 brackets and standard deduction: [Revenue Procedure 2025-32](https://www.irs.gov/pub/irs-drop/rp-25-32.pdf). Market levels: [CNBC US markets](https://www.cnbc.com/markets/). The conversation a portfolio manager, a CPA, a financial planner and an estate attorney would have about your money if the four of them were ever in the same room. None of them ever talk to each other. This is that room, every weekday at 6:45am, sized to a portfolio between $500,000 and $5,000,000. The Nest Egg is educational material published by a registered representative. It is not tax, legal or investment advice, and it is not an offer or solicitation. Every case shown is a hypothetical illustration of published rates, built to demonstrate arithmetic, and is not a projection of any reader’s result. The 2028 Medicare thresholds have not been published and are not estimated here. Consult your own tax and legal advisors before acting. ## Sources - [The Nest Egg, original issue](https://retirement-wealth.beehiiv.com/p/one-dollar-over-274-000-costs-3-472-80) --- 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.