These 9 Income Types Won't Raise Your Medicare Bill

When living on a fixed income, understanding Medicare's Income-Related Monthly Adjustment Amount (IRMAA) is crucial for a stress-free retirement. IRMAA is an extra charge added to your Medicare premiums if your income is above a certain threshold, and unexpectedly higher premiums can take a big bite out of your fixed income.

IRMAA is based on your modified adjusted gross income (MAGI), but not all income counts toward that amount. By tapping into tax-advantaged and non-taxed income streams, you can reduce your MAGI and avoid higher Part B and Part D premiums. Here are nine income types that help you stretch your nest egg and keep Medicare premiums in check.

What is IRMAA?

IRMAA is an extra fee added to your Medicare Part B and Part D premiums if your MAGI exceeds set thresholds two years prior. That means the 2026 IRMAA brackets are based on your MAGI from 2024.

Essentially, if your MAGI reported on your 2024 tax return is above a certain amount, you'll pay the standard premium plus the IRMAA. Ultimately, these charges apply to higher-income retirees on certain Medicare plans and result in higher premiums.

MAGI includes adjusted gross income plus tax-exempt interest, so even nontaxable interest may count toward IRMAA unless structured properly.

What are the 2026 IRMAA brackets?

In 2026, single filers whose 2024 income exceeded $109,000 pay higher Medicare Part B and D premiums. This is $218,000 for joint filers. The total premium varies by income tier, but Part B surcharges range from $81.20 to $487, and Part D surcharges range from $14.50 to $91.

That means that being just above a threshold could add hundreds of dollars a year to Part B and Part D costs. Knowing where you fall helps you plan your income accordingly.

Luckily, not all income counts toward IRMAA. Keep reading to learn which types of income can help you avoid higher premiums.

Roth IRA distributions

Qualified Roth IRA withdrawals, when you're over 59½ and the account's been open for at least five years, aren't included in your MAGI calculation for IRMAA purposes because these distributions are tax-free.

For example, a $10,000 Roth withdrawal won't bump your MAGI. Retirees can prioritize Roth withdrawals to fund living expenses while avoiding IRMAA triggers.

Health savings account (HSA) withdrawals

HSA distributions used for qualified medical costs are tax-free and, therefore, excluded from your MAGI. For example, if you withdraw $7,500 to pay for long-term care premiums, that amount doesn't affect your IRMAA brackets. Make sure to keep receipts to prove the expenses were qualified.

Life insurance proceeds

Lump-sum death benefits from a life insurance policy are not included in MAGI, as they are tax-free. For example, if you receive a $100,000 payout, it won't impact your MAGI even if used for estate planning. 

This can be an intentional strategy to preserve cash flow without triggering higher Medicare costs. However, be cautious since any interest earned on the proceeds is generally taxable and may affect your MAGI, while growth in the cash value of a permanent life insurance policy is generally tax-deferred but may affect your MAGI if it results in taxable income.

Reverse mortgage payments

Funds from a reverse mortgage are considered loan advances, not income, so they don't increase your MAGI as they are not taxable. Use these funds carefully as a non-taxed liquidity option. Remember, the loan becomes due when the home is sold,   or the borrower moves out.

Qualified charitable distributions (QCDs)

For tax year 2026, direct donations up to $111,000 from IRA owners age 70 ½ or older to qualified charities bypass taxable income and MAGI. Because the distribution bypasses you and goes directly to a qualified charity from your IRA, it avoids counting as taxable income and won't bump your premiums.

QCDs not only support good causes, but they can also help effectively manage income and count toward the year's required minimum distributions (RMDs) for those age 73 or older. It's ideal to make QCDs in years when your MAGI is creeping near the threshold.

Gifts received

Receiving a cash gift from a family member or friend generally won't increase your taxable income or your Medicare IRMAA income (MAGI). This is true even if the gift exceeds $19,000. The $19,000 annual gift tax exclusion for 2026 applies to the person giving the gift, not the person receiving it.

For example, if your adult child gives you $25,000 to help cover retirement expenses, you generally won't owe federal income tax on the gift, and it won't increase your MAGI for Medicare premium purposes. However, any taxable interest or investment earnings from the gift could increase your MAGI and potentially raise your Medicare premiums.

Worker's compensation

Disability payments from workers' compensation are not subject to federal taxes and are excluded from MAGI (if paid under a workers' compensation act). So, if a retiree receives $15,000 from a work-related injury fund, it won't affect their Medicare premiums.

It offers stability without adding to taxable income, but be sure that the payments are properly classified to retain tax exclusion.

Veterans' benefits

Disability pensions and other qualifying VA benefits are non-taxable and therefore are not included in the calculation of your MAGI. For example, an annual $20,000 disability pension won't count toward IRMAA.

For qualifying veterans, it's a significant tax-free income source, but ensure filings clearly designate such benefits to avoid misclassification.

Inheritance outside of tax‑deferred accounts

If you inherit cash, property, or other assets outside of tax-deferred accounts, those inheritances generally do not count toward your MAGI. IRS Publication 525 confirms that gifts, bequests, and inheritances, such as money and real estate, are not considered taxable income when received.

For example, inheriting $50,000 in a savings account should not spike your reported income in that year, helping you stay below IRMAA thresholds. However, keep in mind that any future income generated by those assets, like rent or dividends, will count as taxable income when it's received.

Bottom line

You don't have to let IRMAA penalties erode your retirement funds. By stacking non-MAGI income like Roth withdrawals, reverse mortgages, or qualified charitable distributions, you can keep Medicare costs in check. Consider these tips to maximize your senior benefits and make smart money moves as you enter your golden years.

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