IRMAA
Income-Related Monthly Adjustment Amount — a Medicare premium surcharge triggered by crossing income thresholds.
Once modified adjusted gross income passes certain cliffs, Medicare Part B and Part D premiums step up — and a single dollar over a threshold can cost hundreds per month, per spouse, for the year. Because IRMAA is assessed on income from two years prior, Roth conversions and capital-gain realizations have to be planned with the cliff in view. It's a classic example of a threshold that rewards looking a year ahead.
A cliff, not a ramp
IRMAA is a surcharge added to Medicare Part B and Part D premiums once your modified adjusted gross income crosses a series of brackets. It isn't phased in — each threshold is a cliff, so a single dollar over the line moves you into the next tier and can add hundreds of dollars per month, charged to each spouse on Medicare, for the whole year. The surcharge resets annually based on where your income lands.
The two-year lookback that catches people
IRMAA for a given year is assessed on the MAGI from your return two years earlier, so a one-time income spike — a Roth conversion, a large capital gain, an RSU vest, the sale of a business — quietly raises premiums two years later, often after you've forgotten the cause. That lag is exactly why income-shaping decisions for anyone near or in Medicare have to be modeled against the bracket a year or two ahead.
How Formation handles it
Formation surfaces your projected income against the IRMAA thresholds so a Roth conversion or gain realization that would tip you over a cliff is visible before you execute, not two years after. The decision to manage the bracket stays a conversation with your CPA — Formation makes sure the line is already on the chart.
A worked example
You're 65 and do a $30,000 Roth conversion that pushes your MAGI $500 past an IRMAA threshold. Two years later, both you and your spouse pay the higher Part B and Part D surcharge for all twelve months — a cost that can run well over a thousand dollars for the couple, all to clear a threshold by $500.
Frequently asked
What income is used to calculate IRMAA?
Your modified adjusted gross income — generally AGI plus tax-exempt interest — from the tax return two years prior. So 2026 premiums are based on 2024 income.
Can I appeal an IRMAA surcharge?
Yes, if a life-changing event (retirement, loss of income, marriage, divorce, death of a spouse) has reduced your income since the lookback year. You file Form SSA-44 with Social Security to request a new determination.
In Formation
Threshold-aware tax planning
See this in your own numbers.
Formation organizes your whole household by entity and cites every figure to its source — the context that makes terms like this actionable.
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