What Counts as Income for IRMAA? Your 2026 MAGI Explained

IRMAA surcharges in 2026 are based on your 2024 MAGI — not your paycheck, not your "taxable income," and not what you actually spent. Municipal bond interest, Roth conversions, and capital gains taxed at 0% all count. Here's exactly what's in the calculation and what isn't.

What counts toward IRMAA MAGI — and what doesn't

Three surprises for high-income retirees

1. Municipal bond interest counts — even though it's "tax-exempt"

Federal tax-exempt interest (muni bonds, certain savings bonds) is added back explicitly to AGI when calculating IRMAA MAGI. If your bond portfolio generates $30,000 in tax-exempt interest, that $30,000 raises your IRMAA MAGI just as much as $30,000 in ordinary income. Congress made this choice deliberately — the MAGI definition for IRMAA is the same as the one used for the ACA premium tax credit, which was designed to prevent high earners from hiding income in municipal bonds.²

2. Long-term capital gains at the 0% rate still count

If your taxable income is low enough to qualify for the 0% long-term capital gains rate, those gains cost you nothing in federal income tax — but they still fully count toward IRMAA MAGI. A retiree who realizes $80,000 in long-term gains from a taxable brokerage account might pay $0 in capital gains tax, then turn around and find those gains pushed them into a higher IRMAA tier, costing $1,148–$2,886 in additional Medicare surcharges. This asymmetry is one of the strongest arguments for working with a specialist on capital gain harvesting timing.³

3. Roth conversions count in the year they happen

Converting $50,000 of a traditional IRA to a Roth IRA adds $50,000 to your MAGI in the year of conversion. If that conversion pushes you over a bracket cliff — say from $104,000 to $118,000 single — you've just triggered $1,148/year in IRMAA surcharges that will hit two years later (2026 premiums are based on 2024 MAGI). The flip side: once the money is in the Roth, future qualified distributions don't count at all. Sequencing conversions below bracket cliffs is the core of IRMAA-aware retirement income planning.

Calculate your IRMAA MAGI

Enter your 2024 income sources below. The calculator adds them up, applies the 85% Social Security inclusion rate for high earners, and shows which 2026 IRMAA tier you land in.

Worked example: a retired couple with $280,000 in combined income

Tom (67) and Carol (65) retired in 2024. Here's their MAGI calculation:

What they could do: Carol has $80,000 sitting in a traditional IRA. If she converts $20,000 of it to Roth in a low-income year before starting Medicare, that income hits when her IRMAA MAGI is lower — not two years later when it might tip a bracket. The $18,000 in muni bond interest is harder to unwind immediately, but a gradual rotation into tax-exempt investments with broader MAGI visibility is worth modeling. And the $35,000 in capital gains could be timed differently — or offset with harvested losses — to stay below the $274,000 Tier 3 floor.

The two-year look-back trap: timing matters more than you think

Your 2026 Medicare premiums are set by your 2024 MAGI. This two-year gap creates specific planning windows:

• Roth conversions: Best done before Medicare eligibility (pre-65) or in a low-income retirement year, not the year you're taking a large RMD or selling appreciated assets.
• Capital gain realization: A year where you already have a one-time income spike (sale of a business, large Roth conversion) is the wrong year to also realize taxable gains. Stack income strategically.
• Year of retirement: If you retire mid-year, your income that year may still be high from salary. The first year of low retirement income is two years away from when it helps your premiums.
• SSA-44 exception: If a qualifying life event (retirement, death of spouse, divorce) caused your income to drop, you can request SSA use current-year income rather than the two-year-old figure. Potentially saves $1,148–$6,936/year per person.