IRMAA in NJ: When Income Raises Medicare Costs

Most people on Medicare pay the standard Part B premium. But if your income crosses certain thresholds, you pay more for both Part B and Part D through a surcharge called IRMAA. The surcharge is based on your tax return from two years earlier, so it often catches people by surprise: a home sale, a large IRA withdrawal, or a final year of salary can show up as higher Medicare premiums long after the money came in. Here's how it works and what you can do about it.

Key Takeaways

IRMAA stands for Income-Related Monthly Adjustment Amount, an extra charge added to Part B and Part D premiums for people with higher incomes.
For 2026, it applies when modified adjusted gross income is above $109,000 for single filers or $218,000 for joint filers.
Medicare generally uses your tax return from two years before the premium year, so 2026 premiums are based on 2024 income.
The tiers work like cliffs: going $1 over a threshold triggers the full surcharge for that tier.
If your income dropped because of a life-changing event such as retirement, you can ask Social Security to use a more recent year.

The standard Part B premium for 2026 is $202.90 a month. People whose income is above set thresholds pay that amount plus an income-related monthly adjustment amount, or IRMAA. A separate IRMAA is added to Part D prescription drug premiums at the same income levels. According to CMS, these surcharges affect roughly 8% of people with Part B. (Source: https://www.cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles, CMS, 2026 Medicare Parts A & B Premiums and Deductibles)

The income Medicare looks at is your modified adjusted gross income (MAGI): the adjusted gross income on your federal return plus any tax-exempt interest, such as interest from municipal bonds. (Source: https://www.ssa.gov/benefits/medicare/medicare-premiums.html, SSA, Medicare Premiums) That means income you don't pay federal tax on can still push you into a higher tier.

Here's what Part B and Part D cost per person, per month, in 2026 at each income level:

Up to $109,000 (single) or $218,000 (joint): Part B $202.90, no Part D surcharge
Up to $137,000 / $274,000: Part B $284.10, plus $14.50 for Part D
Up to $171,000 / $342,000: Part B $405.80, plus $37.50 for Part D
Up to $205,000 / $410,000: Part B $527.50, plus $60.40 for Part D
Under $500,000 / $750,000: Part B $649.20, plus $83.30 for Part D
$500,000 / $750,000 or more: Part B $689.90, plus $91.00 for Part D

(Source: https://www.cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles, CMS, 2026 Medicare Parts A & B Premiums and Deductibles) CMS usually announces the next year's amounts in the fall, so check for the 2027 figures before relying on these for next year.

For a married couple who are both on Medicare, the surcharge applies to each spouse separately, so the household cost of crossing a tier is doubled. And because each tier is a cliff, not a gradual phase-in, a small amount of extra income right at a threshold can cost far more in premiums than it adds in income.

Social Security, which decides IRMAA, generally uses the most recent tax return the IRS provides, which is usually from two years before the premium year. (Source: ssa.gov/benefits/medicare/medicare-premiums.html, SSA, Medicare Premiums) That lag creates a few common surprises:

Your last working years. If you retire at 65, your first Medicare premiums may be based on a year when you were still earning a full salary.
One-time income. Selling a home or a business, taking a large capital gain, or receiving a big bonus can move you up a tier two years later.
Retirement account decisions. A large IRA withdrawal or a Roth conversion counts toward MAGI in the year it happens. So do Required Minimum Distributions once they begin.

None of this means you should avoid those decisions. Selling a home or converting to a Roth can still make sense even after a temporary premium increase. It does mean the Medicare cost belongs in the math before you act, not after the notice arrives.

If your income has gone down since the year Social Security used, you can ask it to use a more recent year by filing Form SSA-44. The form covers specific life-changing events: marriage, divorce or annulment, death of a spouse, work stoppage, work reduction, loss of income-producing property, loss of pension income, and certain employer settlement payments. (Source: ssa.gov/forms/ssa-44.pdf, SSA, Form SSA-44)

Retirement itself counts as a work stoppage, which makes this one of the most useful forms for new retirees. You'll need documentation of the event, and if you're asking Social Security to use an estimate of your current-year income, it will later check that estimate against your actual tax return. A one-time spike in income, like a home sale, isn't on that list, so it generally won't qualify on its own. You can also appeal an IRMAA decision if you believe the income information used was wrong.

IRMAA is a federal surcharge, so it works the same way in New Jersey as anywhere else. What's different is how the income behind it is taxed. New Jersey doesn't tax Social Security, and residents 62 and older may be able to exclude some pension and IRA income if their total income is $150,000 or less. (Source: nj.gov/treasury/taxation/njit7.shtml, NJ Division of Taxation, Retirement Income Exclusions) Medicare doesn't use those state exclusions. It looks only at your federal MAGI, so a withdrawal that adds little to your New Jersey bill can still raise your premiums. Looking at both together is part of good tax planning.

IRMAA sits where your Medicare coverage, your tax return, and your withdrawal strategy meet. The same decision, like when to sell a property or how much to convert to a Roth, can look very different once you add two years of premiums to the cost. Planning income around the thresholds won't always be possible or worth it, but knowing where they are lets you make the trade-off on purpose.

If you're nearing 65, already on Medicare, or planning a large withdrawal or sale, our Medicare planning team works with retirees across New Jersey. Book your retirement review or call 856-444-LIFE, and we'll look at how your income and premiums fit together.