IRMAA, RMDs, and Capital Gains: How One “Big Income Year” Can Raise Medicare Premiums Later

If you’ve ever heard someone say, “My Medicare premium jumped and I don’t know why,” there’s a good chance IRMAA is the reason.

IRMAA (Income-Related Monthly Adjustment Amount) is an extra charge added to Medicare premiums when income is above certain levels. It can affect Part B (doctor/outpatient coverage) and Part D (prescription coverage). The part that catches people off guard: IRMAA is based on your income from two years ago. That time lag is the whole game.

This article explains IRMAA in plain English for retirees and seniors, and in a practical planning framework that financial advisors will recognize—without drifting into tax advice.

The core concept: Medicare uses a 2-year lookback

Medicare doesn’t set IRMAA using what you earn this year. It uses the income shown on your federal tax return from two years prior.

So an income spike in 2026 can raise Medicare premiums in 2028.

This is why retirees get surprised. They’ll say, “But I’m retired now—my income is lower.” Medicare may still be looking at the year they sold a property, did a big Roth conversion, or realized a large capital gain.

The income number that matters: Medicare MAGI (not your “after deductions” income)

IRMAA is based on MAGI as Medicare defines it. In practical terms, it’s:

• Adjusted Gross Income (AGI)
  plus
• Tax-exempt interest (most commonly municipal bond interest)

Here’s the important takeaway: many “deductions” people think about—like the standard deduction, itemized deductions, and many credits—generally don’t change that MAGI figure the way people assume. That’s why someone can say, “But I had a lot of deductions,” and still get hit with IRMAA.

This is also why municipal bonds can create confusion: the interest may be “tax-free” for federal income tax purposes, but it can still count toward the income figure used for IRMAA.

The usual suspects: what causes one-time income spikes

When I see IRMAA problems, it’s usually one of these:

1) RMDs (Required Minimum Distributions)

Once RMDs begin under current law (the starting age depends on birth year), you’re required to withdraw at least a minimum amount each year from most pre-tax retirement accounts (like Traditional IRAs and many employer plans). Those withdrawals typically count as taxable income.

In other words: RMDs can turn on a new stream of taxable income that didn’t exist before—especially for people who were living off savings, dividends, or part-time earnings.

2) Capital gains

Selling investments at a profit can be perfectly normal, but it can also push income over an IRMAA threshold—especially if it’s a concentrated position, a big rebalancing year, or selling a long-held stock with a large embedded gain.

3) Roth conversions

A Roth conversion can be a smart long-term strategy, but the conversion amount generally counts as taxable income in that year. Large conversions are one of the fastest ways to trip IRMAA because they can be sizable and are often done deliberately in a short window.

4) Selling property or a business

This is the classic “big year.” A property sale, business sale, or one-time liquidity event can spike income dramatically. Even if it’s a one-off, IRMAA can still apply later for the full year Medicare is using that lookback.

“Coordinating” sounds nice… but RMDs are required. So what can you actually do?

Let’s be blunt: you can’t avoid an RMD once it’s required. The planning isn’t about dodging the required piece—it’s about not stacking other income events on top of it when you don’t have to.

Think of the RMD as the “fixed” block, and everything else as “movable blocks.”

Here are the real-world coordination levers:

1) Take the RMD early in the year

This isn’t tax strategy—it’s just smart planning. If you take the RMD earlier, you know what your baseline income looks like. That makes it easier to avoid accidental stacking later.

2) Don’t combine a large RMD year with a large capital gain year if you can help it

If you’re planning to sell an investment with a big gain, or you’re rebalancing a taxable account, ask the simple question: Does this year already have a big RMD? If yes, spreading gains across tax years may prevent crossing an IRMAA threshold.

3) Spread discretionary income events across years

Many events are optional or partially optional:

• selling “some” shares this year and “some” next year
• staged Roth conversions rather than one large conversion
• timing a planned sale when there’s flexibility (this is CPA/legal territory, but the concept is easy to explain)

4) Know that charitable strategies exist (for those who already give)

For seniors who are charitably inclined, there are strategies that can reduce taxable income impact in certain situations (for example, giving directly from an IRA in ways that may keep some amounts out of AGI). The key is to treat this as a CPA conversation—but it’s worth mentioning as a planning option when appropriate.

A simple example seniors understand immediately

Imagine two retirees, both with the same portfolio value.

Retiree A

• Takes an RMD
• Also sells a large chunk of stock with a big gain that same year

Retiree B

• Takes the same RMD
• Sells only what’s needed that year and spreads the rest into the following year

They might pay similar taxes over time, but Retiree A is more likely to cross an IRMAA threshold and pay higher Medicare premiums two years later—simply because of timing.

That’s the point of “coordination.” It’s not fancy. It’s avoiding preventable pile-ups.

What financial advisors should take from this

IRMAA is effectively a “shadow cost” that sits outside the standard tax bracket conversation. Two clients can have the same investment plan and the same long-term objective, but timing decisions can change what Medicare charges later.

A clean workflow is:

1. Identify whether the client is in the Medicare/near-Medicare window
2. Map expected “income spikes” for the next 2–3 years (RMDs, planned gains, conversions, liquidity events)
3. Coordinate timing decisions with the CPA so the client isn’t blindsided by premiums

The best line to use in a presentation (so you stay in your lane)

“I’m not a tax advisor. My role is to flag the Medicare premium consequences of income decisions so you can coordinate timing with your CPA or financial advisor.”

That’s honest, accurate, and it protects you.

Bottom line

IRMAA isn’t rare. It’s common, predictable, and often avoidable when people understand one rule: Medicare looks back two years. Once you accept that, the planning becomes straightforward:

• RMDs are required (fixed).
• Capital gains and Roth conversions are often flexible (movable).
• Stacking big income events in the same year is what creates surprise surcharges.

If you want to reduce surprises, plan income events two years ahead—even if you don’t change the plan, just knowing what year Medicare will “see” can make a big difference.

Disclaimer: This is educational information only, not tax or legal advice. Always coordinate specific decisions with your CPA and financial advisor.