IRMAA Planning in Arizona: What to Do About Medicare Surcharges

This page assumes you already know what IRMAA is: an income-related surcharge added to Medicare Part B and Part D premiums. If not, the explainer pages linked below cover the basics. What follows is about what to do with it.

IRMAA is not marginal. Income tax charges the higher rate only on dollars inside the higher bracket. IRMAA charges the entire tier surcharge the moment MAGI lands one dollar above a threshold. In the 2026 table, the married filing jointly first threshold is $218,000 of 2024 MAGI. At $218,001, each spouse on Medicare pays $81.20 more per month for Part B and $14.50 more per month for Part D, or $1,148.40 per person for 2026. For a couple with both spouses enrolled, that is $2,296.80 for 2026, triggered by one dollar.

That shape changes how the numbers should be read. A $5,000 conversion that tips a household over a line is not a $5,000 decision. It carries a surcharge bill that can exceed the income tax on the conversion itself. A $50,000 conversion that stays inside a tier carries no added IRMAA at all. The planning question is therefore less about how much income and more about which side of each line it falls on.

The 2026 married filing jointly tiers, by 2024 MAGI, are: $218,000 or less (no surcharge), $218,001 to $274,000, $274,001 to $342,000, $342,001 to $410,000, $410,001 to $749,999, and $750,000 or more. The single filer lines are $109,000, $137,000, $171,000, $205,000 and $500,000, with the top single tier starting at $500,000 or more. The top threshold is fixed by statute and not indexed until 2028, while the lower tiers adjust annually.

Social Security uses the tax return from two years earlier to set the premium. For 2026 Medicare premiums, the starting point is the 2024 return. If that return is not available, Social Security can use the 2023 return. The same logic runs forward: income you control in 2026 is the income that sets 2028 premiums. CMS typically announces the next year's amounts in the fall, and 2027 amounts had not been published as of October 2026, so any forward planning treats the 2026 table as a placeholder that will move with inflation.

This creates a calendar that most retirement plans do not track. The first year income matters is two years before Medicare starts. Someone turning 65 in 2028 has 2026 income set the first-year premium. That is often a year of peak wages, deferred compensation payouts, or a business sale, which is why the years around retirement tend to carry the largest IRMAA exposure.

The calendar also means the decision window is open before year-end. Conversion amounts, gain realization and charitable giving for a given tax year can be adjusted until December 31 of that year, and QCDs need lead time at the custodian. After the return is filed, the year is fixed for IRMAA purposes, apart from the appeal described below or an amended return.

• Age 63: income starts to count toward the first Medicare year for someone enrolling at 65.
• Retirement year: last paychecks, severance, accrued vacation payouts and stock vesting can all land in MAGI.
• First two Medicare years: premiums still reflect working-years income, so the appeal in section 5 matters most here.
• Age 73 or 75, depending on birth year: required minimum distributions (RMDs) add a recurring floor to MAGI that conversions and gains sit on top of.

For IRMAA, MAGI is adjusted gross income (AGI) plus tax-exempt interest. Anything that appears on the AGI line of the 2024 Form 1040 is in the measure, and municipal bond interest is added on top even though it is not federally taxed. That second part surprises people who hold municipal bonds specifically to keep taxable income low.

Counted: wages, pension and annuity income, taxable IRA and 401(k) distributions, the taxable portion of Social Security, interest, ordinary and qualified dividends, realized capital gains, Roth conversion amounts, rental income and tax-exempt interest.

Not counted: qualified Roth IRA and Roth 401(k) withdrawals, the return of after-tax basis, the portion of a qualified charitable distribution (QCD) sent directly to charity (it is excluded from AGI rather than deducted), and the nontaxable portion of Social Security. Unrealized gains also do not count until a sale or a fund distribution makes them taxable.

Deductions deserve a specific warning. Because MAGI starts from AGI, only deductions taken above the line reduce it, such as deductible traditional IRA or health savings account (HSA) contributions (HSA contributions are available only before Medicare enrollment). The standard deduction, itemized deductions and the 2025 to 2028 senior deduction lower taxable income but do not lower the MAGI that IRMAA uses. A year of bunched charitable gifts can reduce income tax and still leave the IRMAA tier unchanged.

These are the common levers retirees and their advisors model. Whether any of them fits a particular household depends on its full tax picture, so treat this as a menu for a conversation rather than instructions.

• Conversion sizing: a Roth conversion adds dollar for dollar to MAGI. Sizing it to finish at or below a tier edge, with a cushion for year-end fund distributions, avoids the surcharge. Sizing it above an edge turns the conversion cost into income tax plus a surcharge two years later.
• Conversion timing: converting in lower-income years, such as the years after work stops and before Medicare or RMDs begin, keeps those dollars out of the two-year window that sets Medicare premiums.
• QCDs: for those age 70 and a half or older, a QCD of up to $111,000 per person in 2026 goes straight to charity and is excluded from AGI. It can also count toward an RMD. It lowers MAGI directly, which a regular charitable deduction does not.
• Capital gain harvesting and realization timing: realized gains raise MAGI, so spreading a large sale across tax years, or pairing gains with realized losses, changes which tier each year lands in. Gains taxed at a low or 0% rate still count in full toward MAGI, so a gain that is cheap for income tax can still move a household toward an IRMAA line.
• Tax-exempt interest: counts in MAGI, so municipal bond income is not a neutral hiding place when the household sits near a threshold.
• Above-the-line deductions: deductible HSA contributions (available only before Medicare enrollment) and, where eligible, traditional IRA deductions reduce AGI. Itemized deduction bunching does not, as noted above.
• Income source choices: drawing from Roth balances or after-tax basis in a year that is already near a line adds spending money without adding MAGI.

Two situations drive most IRMAA surprises. The first is the final working years. Wages, bonuses and stock vesting in the two years before Medicare enrollment set the first premiums, even though income may drop sharply by the time those premiums are billed. The second is the early retirement window, when a household uses low taxable income to convert aggressively and forgets that a conversion in 2026 reaches 2028 premiums.

The appeal exists for the first situation. If income falls because of a qualifying life-changing event, a household can ask Social Security to use a more recent year. Qualifying events include work stoppage, work reduction, marriage, divorce or annulment, death of a spouse, loss of income-producing property, loss of pension income, and an employer settlement payment tied to the employer's closure, bankruptcy or reorganization. The request goes on Form SSA-44 with supporting evidence, such as a retirement letter or final pay stub, and it asks Social Security to use a more recent year's income, including an estimate where the change has not yet shown up on a return. Social Security decides whether the event and the estimate qualify, so approval is not automatic.

The appeal does not cover everything. A one-time capital gain or voluntary Roth conversion that raised MAGI in the lookback year is not a life-changing event, and no reduction is granted just because income has since returned to normal. That is why conversion sizing is made before the tax year closes rather than repaired afterward.

A related point for couples: when one spouse dies, the surviving spouse generally files as single in later years, and the single thresholds in the 2026 table start at $109,000 rather than $218,000. Planning for the survivor's brackets and IRMAA tiers is part of the same exercise.

IRMAA is set by federal law and administered by Social Security and the Centers for Medicare & Medicaid Services (CMS). Arizona does not add a state IRMAA difference, and the 2026 thresholds are the same for a household in Phoenix, Tucson or anywhere else. Arizona does affect the surrounding picture: the state taxes income at a flat 2.5% for 2026 and fully exempts Social Security benefits, so Roth conversion income is taxed by Arizona at 2.5% in addition to any IRMAA effect. That is a separate calculation from IRMAA itself.

The practical risk is mismatch between the person projecting income and the person preparing the return. A planner may size a conversion in November using one number, then a tax preparer finalizes the return in April with a late brokerage 1099, a fund distribution or a corrected basis, and MAGI lands across a line nobody was watching. IRMAA exposure is easiest to manage when the projection and the return come from the same set of assumptions.

At Singh PWM, planning is led by a CFP® (since 2016) who is also an Enrolled Agent (since 2026), so for Personalized CFO households, where tax preparation is included, the income projection, the conversion decision and the tax return work from the same numbers in one office. A household using separate professionals can get a similar result with a standing year-end exchange of projected MAGI and a list of items still to arrive.