Social Security and Medicare
IRMAA and ACA subsidy cliffs
How Medicare's income-related premiums (IRMAA) and the ACA premium tax credit cliff work, with the thresholds and worked examples showing what one extra dollar of income can cost.
Education, not advice. This guide explains general rules with invented examples. It isn't financial, tax or legal advice for your situation. Tax figures are for 2026 and come from published IRS, SSA and CMS sources. Rules change, so check current figures before you act.
Most of the tax code is gradual. Earn a dollar more and you pay a little more. Two rules that matter a lot in retirement work differently. Cross a line by one dollar and you pay a fixed, much larger amount.
- IRMAA raises Medicare premiums for people with higher incomes.
- The ACA subsidy cliff removes the whole premium tax credit for marketplace health insurance above a set income.
Both use a version of your adjusted gross income called modified adjusted gross income (MAGI). Roth conversions, capital gains and traditional IRA withdrawals all raise it.
IRMAA: Medicare premiums based on income
IRMAA stands for income-related monthly adjustment amount. Everyone on Medicare Part B pays a standard premium. In 2026 it's $202.90 a month per person. Above set income levels, you pay more for Part B, plus a surcharge on top of your Part D drug plan premium.
Two details catch people out:
- It looks back two years. 2026 premiums are based on your 2024 income. A Roth conversion at 63 can raise your premiums at 65.
- It's a cliff, not a slope. One dollar over a threshold puts you in the next tier for the whole year.
2026 tiers, married filing jointly
| 2024 MAGI | Part B per person, monthly | Part D surcharge per person, monthly |
|---|---|---|
| Up to $218,000 | $202.90 | $0 |
| Over $218,000 | $284.10 | $14.50 |
| Over $274,000 | $405.80 | $37.50 |
| Over $342,000 | $527.50 | $60.40 |
| Over $410,000 | $649.20 | $83.30 |
| $750,000 or more | $689.90 | $91 |
2026 tiers, single
| 2024 MAGI | Part B monthly | Part D surcharge monthly |
|---|---|---|
| Up to $109,000 | $202.90 | $0 |
| Over $109,000 | $284.10 | $14.50 |
| Over $137,000 | $405.80 | $37.50 |
| Over $171,000 | $527.50 | $60.40 |
| Over $205,000 | $649.20 | $83.30 |
| $500,000 or more | $689.90 | $91 |
Married people who file separately and lived together during the year have their own, steeper table.
Worked example: $2,000 over the line
Carol and Ben are both on Medicare. In 2024 they converted part of an IRA to a Roth, and their MAGI came to $220,000. That's $2,000 over the first joint threshold of $218,000.
In 2026, each of them pays $284.10 a month for Part B instead of $202.90, plus $14.50 a month on Part D. That's $95.70 a month each, or $2,296.80 for the year for the two of them.
Their extra $2,000 of income cost them more than $2,000 in premiums. Converting $2,001 less would have avoided it.
Ways to manage IRMAA
- Know your number before December. Conversions and gain harvesting are the easiest income to dial up or down.
- Leave a margin. Thresholds for future years aren't known yet. Fund distributions late in the year can push you over.
- Ask for a new determination after a life change. If your income fell because you retired, married, divorced or lost a spouse, you can ask Social Security to use a more recent year's income.
- Don't fear every tier. Sometimes paying one tier of IRMAA for a large conversion still lowers lifetime costs. Compare both on your plan.
The ACA premium tax credit and its cliff
If you retire before 65 and buy health insurance on the ACA marketplace, a premium tax credit can lower the cost. The credit depends on your income compared with the federal poverty line for your household size.
For 2026 coverage, the enhanced credits of recent years have expired. That brings back two hard limits:
- No credit above 400% of the poverty line. For 2026 coverage, that's $62,600 for one person and $84,600 for two, in the 48 contiguous states and DC.
- No credit below 100% of the poverty line. Very low income can also disqualify you. In states that expanded Medicaid, that household is usually steered to Medicaid instead.
Between those limits, you're expected to pay a share of your income toward the benchmark plan. The share rises with income, reaching 9.96% from 300% to 400% of the poverty line. The credit pays the rest.
Worked example: $1,000 over the cliff
Tomás and Alma are 62 and 60. They buy marketplace coverage for 2026. The benchmark silver plan for the two of them costs $1,800 a month, or $21,600 a year. This premium is invented. Yours depends on your age and where you live.
| Their 2026 MAGI | Share of poverty line | Expected contribution | Premium tax credit |
|---|---|---|---|
| $84,000 | 397% | $8,366 (9.96% of income) | $13,234 |
| $85,000 | 402% | No limit | $0 |
At $84,000 they get a credit of about $13,234. At $85,000 they get nothing. One thousand dollars of extra income costs them $13,234.
Advance credits are repaid in full
Most people take the credit in advance, as a lower monthly premium. If your actual income for the year turns out higher, you repay the difference when you file. For tax years from 2026, the caps that used to limit that repayment no longer apply. Going over the cliff can mean repaying the whole year's advance credit.
Ways to manage the ACA cliff
- Plan your income for the whole year. Every source counts: IRA withdrawals, conversions, realized gains, interest and dividends.
- Use cash and taxable savings with little gain. Spending cash, or selling investments with high basis, adds little to MAGI.
- Delay conversions and gain harvesting until the year you start Medicare, when the cliff no longer applies.
- Watch the low end too. Income below 100% of the poverty line can lose the credit.
How the app handles them
The projection applies IRMAA to Medicare premiums using income from two years earlier, and it calculates the premium tax credit each year you're on marketplace coverage, reconciled at year end. You enter your benchmark premium in the healthcare section of your plan. Roth conversion settings can stop each year's conversion before it crosses the next IRMAA tier or the ACA cliff.
Thresholds for years after 2026 are projected by indexing for inflation. Real thresholds will differ, so leave a margin.
Frequently asked questions
Does IRMAA count tax-exempt interest?
Yes. MAGI for IRMAA adds tax-exempt interest back to adjusted gross income.
Do Roth IRA withdrawals count toward either limit?
Qualified Roth withdrawals don't count toward MAGI for either rule. That's one reason Roth savings are useful before Medicare.
Is the cliff permanent?
It's current law for 2026. Congress has extended enhanced credits before and could again. The app uses the law as written and updates when it changes.