The 2024 Market in Context

By nearly any measure, 2024 was a banner year for U.S. equities. The S&P 500 gained more than 20% for the second consecutive year, driven by a resilient economy, strong corporate earnings, and renewed enthusiasm around artificial intelligence. The Nasdaq posted similarly impressive numbers, and international markets saw meaningful upside as well.

For investors, the environment created a powerful incentive to act. Many rebalanced portfolios that had grown equity-heavy. Others sold concentrated positions, exercised stock options, or took larger-than-usual distributions from retirement accounts. Fund managers locked in gains. Taxable brokerage accounts generated capital gain distributions whether the account holder sold a single share or not.

At the time, these were smart financial moves. But in early 2026, a consequence that many investors did not anticipate is now arriving in the form of higher Medicare premiums.

Why Your 2024 Gains Matter Right Now

Medicare's Income-Related Monthly Adjustment Amount, known as IRMAA, is determined by a two-year lookback. The income that SSA uses to calculate your 2026 premiums is not your 2026 income. It is your 2024 Modified Adjusted Gross Income, reported on the tax return you filed in early 2025.

That creates a direct pipeline: gains realized in calendar year 2024 appeared on your 2024 federal tax return, and SSA is using that return right now to set your Part B and Part D premiums for all of 2026.

For beneficiaries whose 2024 MAGI was higher than 2023 or 2022 due to market performance, this may mean landing in a higher IRMAA bracket for the first time, or moving up a tier compared to the prior year.

Capital Gains and MAGI: What Counts

Both short-term and long-term capital gains are included in MAGI. There is no distinction for IRMAA purposes. A $50,000 gain on a stock held for three months and a $50,000 gain on a stock held for a decade both increase MAGI by exactly the same amount.

Critically, mutual fund capital gain distributions also count, even when the investor did not sell any shares. Many equity funds distributed substantial gains in December 2024 after years of strong performance. If you held those funds in a taxable account, those distributions increased your 2024 MAGI regardless of whether you reinvested them or took the cash.

Example: A joint-filing couple had $210,000 in pension and Social Security income in 2024, safely below the $218,000 IRMAA threshold. Their taxable brokerage account then distributed $12,000 in mutual fund capital gains they never requested. That pushed their MAGI to $222,000, triggering the first IRMAA tier: an additional $81.20 per month in Part B premiums plus $14.50 per month in Part D surcharges, for each spouse.

Total additional cost for the couple in 2026: $2,296.80. One penny over the line costs you over $1,000 this year.

How 2024 Gains Map to 2026 IRMAA Brackets

The table below shows the 2026 IRMAA tiers for joint filers, along with the total annual surcharge per person. For beneficiaries whose 2024 MAGI crossed any of these lines due to market activity, the corresponding surcharge applies for the full 2026 calendar year.

2024 MAGI
(Joint Filers)		 Part B Monthly Part D Surcharge Annual Cost
per Person
≤ $218,000 $202.90 $0 Standard (no surcharge)
$218,000.01 – $274,000 $284.10 $14.50 $1,148.40
$274,000.01 – $342,000 $405.80 $37.50 $2,884.80
$342,000.01 – $410,000 $527.50 $60.40 $4,620.00
$410,000.01 – $749,999.99 $649.20 $83.30 $6,355.20
≥ $750,000 $689.90 $91.00 $6,936.00

Note: the annual surcharge per person is calculated as the Part B increase above $202.90 plus the Part D surcharge, multiplied by 12 months. For couples where both spouses are on Medicare, double the figure.

The Hidden Triggers Most Investors Overlook

Outright stock sales are the most obvious source of capital gains, but several other 2024 events may have increased MAGI in ways that many Medicare beneficiaries did not anticipate:

Home Sales in a Hot Market

The 2024 real estate market remained strong in many regions, and homeowners who sold during the year may have generated gains that count toward MAGI. The federal exclusion allows $250,000 in gain for single filers and $500,000 for joint filers, but any amount above those thresholds is fully taxable and fully counted in MAGI.

For a couple who purchased a home for $400,000 years ago and sold it in 2024 for $1.1 million, the $700,000 gain exceeds the $500,000 exclusion by $200,000. That $200,000 flows directly into MAGI, and depending on other income, it may push them well into Tier 2 or Tier 3 for 2026.

Home sales are particularly impactful because they tend to produce large, one-time income spikes. The IRMAA system does not distinguish between recurring income and a single transaction that may never repeat.

Roth Conversions at Peak Valuations

Roth conversions are often considered one of the most effective long-term strategies for managing retirement income and reducing future tax liability. Many investors accelerated conversions in 2024 while tax rates remained favorable.

The challenge: every dollar converted from a traditional IRA to a Roth IRA is taxable in the year of conversion and counts toward MAGI. In a year when equity values were elevated, converting the same number of shares produced a larger taxable event than it would have in a down market.

An investor who converted $150,000 in IRA assets during the 2024 rally may have intended that conversion to reduce future RMDs and IRMAA exposure after age 73. The long-term math may still work in their favor, but the two-year lookback means the 2024 conversion is increasing their 2026 IRMAA bracket right now.

What You Can Do Now

If your 2024 income triggered an IRMAA surcharge for 2026, that determination is already in place. The 2024 tax year is closed, and the income reported on that return cannot be changed.

However, there are two paths worth considering:

Appeal if you qualify. If you experienced a qualifying life-changing event since 2024, such as retirement, reduction in work hours, death of a spouse, divorce, or loss of income-producing property, you may be eligible to request that SSA use a more recent tax year instead. This is done through Form SSA-44, and the appeal window is 60 days from the date of your determination notice.

Plan forward for 2027. Your 2025 income is determining your 2027 IRMAA. Every decision you make this year about distributions, conversions, asset sales, and income timing will directly affect what you pay for Medicare in two years. Strategies that are often considered effective include tax-loss harvesting to offset gains, timing Roth conversions to stay below bracket thresholds, using Qualified Charitable Distributions (up to $108,000 per year for those 70.5 and older), and choosing tax-efficient fund placements in taxable accounts.

It is also worth noting that IRMAA surcharges may qualify as deductible medical expenses on Schedule A if your total medical costs exceed 7.5% of your adjusted gross income. This does not eliminate the surcharge, but it may soften the impact at tax time. Consult a tax professional to determine if this applies to your situation.

The difference between proactive planning and reacting after the fact can be thousands of dollars per year, per person. Working with an advisor who understands the interaction between investment decisions and Medicare costs is often the most effective way to manage this exposure going forward.

See Where You Stand

Your 2024 income has already set your 2026 IRMAA tier. An IRMAA Report provides an estimated breakdown of your surcharge exposure based on current CMS-published thresholds, so you can see the numbers clearly and plan accordingly.

Get Your IRMAA Report: $25

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