MAGI and Medicare: How Your Parent's Income Affects Their Premiums

Most people assume Medicare is the same cost for everyone. It isn't. If your parent's income exceeds certain thresholds, they pay significantly more for Medicare Part B and Part D through a surcharge called IRMAA — the Income-Related Monthly Adjustment Amount. For high-earning seniors, this can add thousands of dollars per year to their Medicare costs.

Understanding how Modified Adjusted Gross Income (MAGI) works in the Medicare context helps you plan proactively — and in some cases, appeal the surcharge if it's based on outdated income information.

What Is MAGI in the Medicare Context?

MAGI for Medicare purposes is not the same formula used for other federal programs. For Medicare, CMS defines MAGI as:

• Adjusted Gross Income (AGI) from the tax return, plus
• Tax-exempt interest income (e.g., interest from municipal bonds)

That's it. Unlike the ACA marketplace MAGI calculation, Medicare doesn't add back items like foreign income exclusions or student loan interest. The key thing to understand is that tax-exempt interest income counts. A senior who avoids income taxes by holding municipal bonds will still have that income counted for IRMAA purposes.

CMS uses the tax return from two years prior to determine IRMAA surcharges. So premiums in 2026 are based on your parent's 2024 tax return. This creates a lag effect that matters for retirement planning.

The 2026 IRMAA Thresholds

Here are the 2026 IRMAA tiers for Part B premiums. The standard Part B premium in 2026 is approximately $202.90/month for those below the income threshold.

Part D also carries IRMAA surcharges, ranging from approximately $13.70/month to $85.80/month depending on income tier.

At the highest income tier, a single senior pays an additional $374/month for Part B alone compared to the standard premium — that's $4,488/year in surcharges on top of standard costs.

Why the Two-Year Lag Creates Problems

Because CMS uses a two-year-old tax return, situations where income drops significantly create an unfair mismatch. Common scenarios where this happens:

• Parent retires at 65: Their 2024 income includes full salary, but by 2026 they're living on Social Security and modest portfolio withdrawals — yet their 2026 premium is based on that high pre-retirement income.
• Parent sells a rental property or business: A one-time capital gain in 2024 pushes them into a high IRMAA tier for 2026, even though it was a single event.
• Death of a spouse: Widower files as single in 2025, but CMS is looking at joint income from 2024 — the single filer threshold is half the married threshold, so the surcharge can jump sharply.
• Significant income decline due to illness or job loss.

In all of these situations, your parent can appeal the IRMAA surcharge using Form SSA-44 (Medicare Income-Related Monthly Adjustment Amount — Life-Changing Event). This form allows them to request that CMS use more recent tax information rather than the two-year-old return.

Appealing an IRMAA Determination

If your parent's income has changed significantly due to a qualifying life event, here's how to appeal:

Qualifying life events for SSA-44:

• Marriage, divorce, or death of a spouse
• Work reduction or work stoppage (including retirement)
• Loss of income-producing property (not through negligence)
• Loss or reduction of pension income
• Receipt of an employer settlement payment

Steps to appeal:

1. Download Form SSA-44 from ssa.gov
2. Attach documentation of the income change (most recent tax return, letter of termination, death certificate, etc.)
3. Submit to your local Social Security office (in person or by mail)
4. SSA will recalculate based on the more recent income year

If the appeal is successful, the corrected premium takes effect quickly — often within the same year. If denied, there is a further appeals process through an Administrative Law Judge hearing.

How Roth Conversions Affect MAGI for Medicare

This is a common area of confusion for families doing retirement tax planning. Roth IRA conversions count as ordinary income in the year they're taken — which means a large Roth conversion in 2024 will push your parent's MAGI up for 2026 Medicare premiums.

This doesn't mean Roth conversions are bad strategy. Over a 20-year retirement, the tax-free growth can far exceed the two-year IRMAA hit. But if your parent is near a tier threshold, it may be worth converting in smaller annual tranches rather than one large conversion.

Illustrative example: If your parent's 2024 MAGI is $100,000, they're comfortably in the standard tier. A $20,000 Roth conversion pushes them to $120,000 — past the $106,000 threshold and into the first IRMAA tier, adding $82/month (roughly $984/year) to their 2026 Part B premium for two years.

This is not a reason to avoid all conversions — but it's worth calculating the two-year cost of the IRMAA bump against the long-term tax benefit.

The Social Security Connection

IRMAA surcharges are collected by reducing the Social Security benefit check. If your parent is already receiving Social Security, the Part B premium (including any IRMAA surcharge) is automatically deducted from their monthly benefit.

This can create a surprise for newly retired parents who expected their Social Security check to be a certain amount, then see it arrive reduced by hundreds of dollars in Part B premiums.

Strategies for Managing Medicare MAGI

A few approaches that can help reduce Medicare MAGI exposure:

Municipal bond interest still counts: Tax-exempt interest is added back into Medicare MAGI. If your parent holds muni bonds for tax efficiency, be aware this counts for IRMAA even though it doesn't appear on most of their tax documents.

Qualified Charitable Distributions (QCDs): Seniors age 70.5+ can donate up to $105,000 per year directly from an IRA to a qualified charity. This satisfies Required Minimum Distributions but does not count as income in AGI — which keeps MAGI lower for Medicare purposes.

Health Savings Account (HSA) distributions: If your parent has an HSA from prior years of high-deductible health plan coverage, HSA distributions used for medical expenses are not included in MAGI.

Capital gain timing: If your parent plans to sell assets with significant gains, spreading the sale across multiple tax years can keep any single year's MAGI below a higher IRMAA tier.

What Adult Children Need to Watch

If you're involved in managing your parent's financial accounts or helping with tax planning, keep IRMAA thresholds in mind as a planning input — not just at enrollment time but every year. A Roth conversion strategy, a property sale, or a portfolio rebalancing that doesn't account for the Medicare premium impact can result in a two-year cost that wasn't anticipated.

For a comprehensive breakdown of Medicare costs, premiums, enrollment strategy, and the full range of factors that affect what your parent pays — including how to navigate the Original Medicare vs. Medicare Advantage decision and choose the right Medigap plan — the Medicare Enrollment Guide provides a detailed, adult-children-focused framework for every aspect of this transition.