Your 2027 Medicare premiums are generally based on your 2025 income. Here's how IRMAA works, why a small difference in income can create a large surcharge, and when you may be able to challenge it.
Imagine opening a letter from Social Security this November and discovering that your Medicare premiums are going up next year. You haven't changed your Medicare coverage. You haven't received any additional benefits. Yet you're being told you must pay more. And the reason may be something that happened nearly two years ago.
Perhaps you sold an investment, converted part of an IRA to a Roth IRA, received a large bonus, or took an unusually large retirement account withdrawal. Or perhaps you were still working in 2025, earning considerably more than you are today.
Welcome to IRMAA—one of the less understood costs of retirement.
If you've received, or soon receive, a notice about higher Medicare premiums for 2027, understanding why you're being charged is the first step toward determining whether there's anything you can do about it.
What Is IRMAA, and Why Am I Paying It?
IRMAA stands for Income-Related Monthly Adjustment Amount.
It's an additional premium that higher-income Medicare beneficiaries pay for Medicare Part B (medical coverage) and Part D (prescription drug coverage). It can apply whether you have Original Medicare with a separate prescription drug plan or a Medicare Advantage plan that includes prescription coverage.
Importantly, IRMAA is assessed individually. If both spouses are enrolled in Medicare and their joint income exceeds a threshold, each spouse pays the applicable additional premium.
If you owe Part D IRMAA, the additional amount is generally deducted from your Social Security benefit or billed directly by Medicare. It's separate from the premium you may pay your prescription drug plan.
Unlike most other Medicare costs, the amount you pay depends on income you reported in a previous year. For 2027, Social Security will generally use your 2025 federal income tax return to determine whether you owe IRMAA. That's because Medicare typically looks back two years when determining these premiums.
The income figure used is called Modified Adjusted Gross Income, or MAGI. For IRMAA purposes, this is generally your adjusted gross income plus tax-exempt interest. That last part surprises some people. Even municipal bond interest, which may be exempt from federal income taxes, counts when determining IRMAA.
And IRMAA isn't based on how much money you have saved. It's based on the income reported for the year being reviewed. You could have substantial retirement savings and pay no IRMAA in a particular year. Or you could have relatively modest savings but face a surcharge because of a one-time taxable event.
The IRMAA Cliff: How One Extra Dollar Can Cost Thousands
This is where IRMAA becomes particularly frustrating. Our federal income tax system is generally progressive. When you move into a higher tax bracket, only the income in that higher bracket is taxed at the higher rate. IRMAA works differently. Medicare has a series of income thresholds. Cross one of those thresholds, even by a dollar, and your Medicare premiums jump to the next level.
The higher premium generally applies for the entire year, not just to the income that exceeded the threshold.
Consider a married couple who are both enrolled in Medicare Parts B and D.
Using the 2026 Medicare premium schedule as an illustration, suppose their income was $274,000. At that income level, each spouse would pay $284.10 per month for Part B, plus an additional $14.50 per month for Part D.
Now suppose their income increased to $274,001—just one dollar more. Each spouse's Part B premium would jump to $405.80 per month, and the Part D surcharge would increase to $37.50 per month.
That single additional dollar of income would cost the couple another $3,472.80 in Medicare premiums over the year.
They received virtually no additional income, but their Medicare costs increased substantially. That's the IRMAA cliff.
Fortunately, the higher premium isn't necessarily permanent. IRMAA is recalculated annually using the applicable income information, and while no one likes paying more for Medicare, that doesn't necessarily mean a financial decision that triggers IRMAA was a mistake. Sometimes realizing a capital gain or converting money to a Roth IRA makes sense despite the additional premium.
The important thing is understanding the consequences before making the decision.
Can You Appeal an IRMAA Increase?
Yes, but not simply because you believe the premium is too high.
Social Security allows beneficiaries to request a new IRMAA determination when certain life-changing events have reduced their income.
One of the most common examples is retirement. Suppose you're single and earned $180,000 in 2025 but retired during 2026. When Social Security determines your 2027 Medicare premiums, it may initially use that higher 2025 income. But perhaps your annual retirement income is now only $75,000. Because you stopped working, you may qualify to have Social Security use your more recent income rather than the income from two years earlier. That could reduce or eliminate your IRMAA surcharge.
This is particularly important for people enrolling in Medicare for the first time. Someone turning 65 in 2027 may have their initial premiums calculated using income earned in 2025, when they were still working full-time. If they've since retired or reduced their work hours, they may qualify for a reduction.
Social Security recognizes several qualifying life-changing events, including:
- Retirement or stopping work
- A significant reduction in work hours
- Marriage or divorce
- The death of a spouse
- Loss of income-producing property due to circumstances beyond your control, such as a natural disaster, theft, or fraud
- Loss or reduction of certain pension income
- Certain employer settlement payments
The key is that your lower income must generally be connected to one of these recognized events. Simply having less income this year isn't enough.
What Happens When a Spouse Dies?
Losing a spouse can create an unexpected Medicare premium problem at an already difficult time.
There are actually two different issues to consider.
The first involves Medicare's two-year income lookback. Social Security may be using a joint tax return that includes income from both spouses, even though the surviving spouse now has considerably less income. Because the death of a spouse is a recognized life-changing event, the survivor may be able to request that Social Security use more recent income information to calculate IRMAA.
But there's a second issue that may become a longer-term problem. A surviving spouse generally moves from married-filing-jointly to single tax status in the years following their spouse's death, unless another filing status applies. And the Medicare income thresholds for single taxpayers are substantially lower than those for married couples filing jointly.
That means a surviving spouse could have less household income but still face higher Medicare premiums.
There's another timing consideration. In the year a spouse dies, the survivor can generally still file a joint federal income tax return. The change to single filing status typically begins the following year, although the effect on Medicare premiums may not appear until later because of IRMAA's two-year lookback.
The important distinction is that Social Security may be able to adjust an IRMAA surcharge based on outdated income information. It cannot simply waive the lower income thresholds that apply to single taxpayers.
That's one reason retirement income planning is especially important after the death of a spouse.
What If My Higher Income Was a One-Time Event?
Here's an important distinction. Suppose you converted $150,000 from a traditional IRA to a Roth IRA in 2025. That conversion substantially increased your taxable income. In 2026, you didn't make another conversion, so your income returned to its normal level. You might reasonably ask Social Security to disregard that unusual income.
Unfortunately, a one-time Roth conversion is not, by itself, a qualifying life-changing event. The same is generally true if your income increased because you sold appreciated investments, received a large IRA distribution, or realized a substantial capital gain. Even though the additional income won't occur again, Social Security ordinarily cannot reduce your IRMAA simply because it was temporary.
There is an important distinction, however. If your income also declined because of a recognized life-changing event, such as retirement, you may still qualify for a new determination.
This is why understanding the reason behind your income change matters.
How Do You Request a Lower IRMAA?
If you believe you qualify for a reduction, the process generally begins with Social Security Form SSA-44, Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event. You provide information about the qualifying event, when it occurred, and your reduced income. Depending on your circumstances, Social Security may ask for documentation supporting the event and your actual or estimated income. You don't necessarily need to wait until you've filed your next income tax return. Social Security can consider a reasonable estimate of your income for a more recent year when the requirements are met.
You can obtain the form and instructions directly from Social Security: https://www.ssa.gov/medicare/lower-irmaa You can also contact Social Security at 1-800-772-1213 for assistance.
What If Social Security Used the Wrong Income Information?
That's a different situation, and it's worth checking before doing anything else.
Although Medicare generally uses income information from two years earlier, Social Security sometimes must go back three years because the more recent tax information isn't available. For example, if your 2025 tax information wasn't available, Social Security may initially use your 2024 income to calculate your 2027 premiums.
Once the newer information becomes available, Social Security may recalculate your IRMAA. If your 2025 income was lower, your premiums could decrease. If it was higher, your premiums could increase.
Similarly, if the IRS information Social Security received was incorrect, or you've filed an amended tax return, you may be able to request a new determination using corrected information.
You don't need to have experienced a qualifying life-changing event to request these corrections.
If you disagree with Social Security's determination, you may also request formal reconsideration, generally within 60 days of receiving the notice. Although people commonly refer to all these requests as an IRMAA appeal, Social Security has different procedures depending on whether you're reporting a life-changing event, correcting tax information, or formally challenging a decision.
Before You Set the Letter Aside
If you've received an IRMAA notice, or expect one soon, don't assume there's nothing you can do about it.
Start by asking a few questions:
1. Which tax year did Social Security use? Was it 2025, or did it have to go back to 2024?
2. Is the income and filing status correct? If not, can you provide updated or corrected tax information?
3. Have your circumstances changed? Did you retire, reduce your work hours, lose a spouse, or experience another qualifying event?
4. Was the higher income a one-time event? If so, understand that this alone generally won't qualify you for a reduction.
5. Are you within the appeal deadline? If you disagree with Social Security's decision, a formal request for reconsideration generally must be filed within 60 days of receiving the determination notice.
You may discover that the additional premium is correct, or you may find that you're eligible to request a reduction.
For those approaching retirement or already retired, understanding how Medicare premiums interact with income taxes and retirement distributions is an important part of financial planning. A decision that seems reasonable when viewed from a tax perspective alone may have additional consequences once Medicare is considered.
And even if you can't change the income that caused your 2027 surcharge, you may still have time to influence future premiums.
What financial decisions should you consider before December 31 to help manage Medicare premiums in the years ahead?
In our next article, we'll explore how Roth conversions, capital gains, required minimum distributions, and other retirement decisions can affect IRMAA two years later—and why avoiding a Medicare surcharge isn't always the best long-term financial decision.
Frequently Asked Questions About Medicare IRMAA
1. Why are my 2027 Medicare premiums based on my 2025 income?
Medicare generally uses your income from two years earlier to determine whether you owe an Income-Related Monthly Adjustment Amount (IRMAA). For 2027, that means Social Security will typically use your 2025 federal income tax return. If your income has decreased because of retirement or another qualifying life-changing event, you may be eligible to request a lower premium.
2. What income counts when Medicare calculates IRMAA?
Medicare uses a modified adjusted gross income (MAGI) calculation that generally includes your adjusted gross income plus tax-exempt interest. Income from wages, pensions, taxable IRA withdrawals, Roth conversions, and realized capital gains can all affect IRMAA. Even municipal bond interest, although generally exempt from federal income tax, is included.
3. Can earning just one dollar more really increase my Medicare premiums by thousands?
Yes. IRMAA uses income thresholds rather than gradually increasing premiums with each additional dollar of income. Crossing a threshold by even one dollar can move you into the next premium level for the year. If both spouses are enrolled in Medicare, each pays the applicable surcharge, potentially increasing their combined annual premiums by thousands of dollars.
4. Can I appeal IRMAA if I retired and my income is now lower?
Yes. Retirement or a reduction in work hours is a recognized life-changing event. If your income has decreased, you may request that Social Security use more recent income information instead of your income from two years earlier. The request generally involves Form SSA-44 and documentation of your retirement and reduced income.
5. Can I appeal IRMAA because I made a large Roth conversion or sold an investment?
Generally, no. A one-time Roth conversion, capital gain, or large IRA withdrawal does not, by itself, qualify as a life-changing event under Social Security's rules. Even if your income returns to normal the following year, the higher premium may still apply. However, if your income also decreased because of retirement or another qualifying event, you may be eligible for a new determination.
6. Can the death of a spouse reduce my Medicare IRMAA surcharge?
Possibly. The death of a spouse is a recognized life-changing event. If Social Security is using an older joint tax return that includes income from both spouses, the survivor may qualify to have premiums recalculated using more recent information. However, the lower IRMAA income thresholds that generally apply to single taxpayers can still result in higher premiums in subsequent years.
7. What if Social Security used the wrong tax return to calculate my IRMAA?
Social Security generally uses income from two years earlier but may use a return from three years earlier if the newer information isn't available. If your notice uses 2024 income instead of 2025, you can request a new determination using your 2025 tax information. Your premiums could increase or decrease depending on the updated income. Corrected or amended tax information may also justify recalculation.
8. How do I request a reduction in IRMAA, and is there a deadline?
For qualifying life-changing events, you can submit Social Security Form SSA-44 with supporting documentation. You may also contact Social Security at 1-800-772-1213. If you're formally appealing a determination, the deadline is generally 60 days after receiving the notice. Requests for a new determination based on qualifying circumstances follow different procedures and timeframes.
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