7 Types of Income That Won't Raise Your Medicare Premiums

When you're retired, there are many factors that determine how much you pay in taxes. For example, earning a high income can often mean paying more in taxes, and it can also increase your Medicare premiums.

Because of that, it's helpful to know which types of income and retirement plans increase your adjusted gross income (AGI) and which don't. Here are examples of several types of income that won't directly increase your Medicare premiums.

Higher earners may pay income-based Medicare surcharges

Many retirees must pay Medicare premiums. How much they pay, and whether or how they'll owe an Income-Related Monthly Adjustment Amount (IRMAA), depends on their modified adjusted gross income (MAGI). MAGI includes both your Adjusted Gross Income (AGI) plus any tax-exempt interest you receive.

As of 2026, married couples earning more than $218,000 and individuals earning more than $109,000 will have to pay an IRMAA.

Qualified Roth account withdrawals

For individuals who are on the border of earning a high enough income to trigger these surcharges, one option is to make a qualified withdrawal from a Roth IRA. Because you contribute to Roth IRAs with after-tax income, you can take out a qualified withdrawal tax-free in retirement.

That amount does not contribute to your MAGI. Because of that, retirees can use a Roth withdrawal as a way to access cash without adding to their adjusted gross income for the year.

Health savings account withdrawals for medical expenses

Another type of withdrawal that doesn't count toward your MAGI is a Health Savings Account (HSA) withdrawal, as long as you use it for qualified health expenses. So, retirees who have to pay a large medical bill, for example, may consider using HSA funds rather than a 401(k) withdrawal. Because qualified HSA funds don't add to a MAGI, they may be preferable especially for those who may be close to the IRMAA threshold.

Qualified charitable distributions that meet certain guidelines

If retirees are worried about RMDs increasing their income too much, another option is to make a qualified charitable distribution (QCD). This is a great option for retirees who want to donate to a charity already, because QCDs can achieve several financial goals at once.

A QCD is available to retirees who are age 70.5 or older and have a traditional IRA. With a QCD, retirees can direct a specific amount, like $10,000, to be paid directly to a charity from their IRA. This contribution can satisfy all or part of retirees' RMD requirements without counting towards taxable income.

Keep in mind that each retiree's RMD requirements may be different because it's based on their nest egg amount.

The portion of Social Security that isn't taxable

Depending on your income level, you may not be taxed on your Social Security income at all. However, those with higher incomes overall may have to pay taxes on as much as 85% of their Social Security income. Still, only the taxable portion of Social Security income counts towards your MAGI, not all of it.

Loans, gifts, or inheritance typically don't count as income

If you take out a loan, that's not typically considered income, so it doesn't increase your MAGI. Reverse mortgages are considered loans, so proceeds from those are not taxable. Similarly, loans against the cash value of certain types of life insurance policies may not count as income. If you receive an inheritance or cash gift, those do not count as income either. The caveat is that if you earn income from a gift, like a piece of property that you rent out, that income can be taxable.

Retirees should be aware of certain exceptions

There are some exceptions to this rule that retirees need to know about, especially because they can be a bit confusing. For example, even though retirees don't pay federal taxes on tax-exempt municipal bond interest, that interest still counts toward the Medicare IRMAA calculation.

Because of that, retirees may think their income is under a certain threshold, but something like bond interest could put them over. That's because, as mentioned previously, your MAGI is calculated by combining both your AGI and any tax-exempt interest income.

Don't forget about the two-year lookback

If you're not sure whether you're over the income threshold, remember that your Medicare premiums are determined by your income two years ago. So, any income you make today can impact your Medicare premiums two years from now. If you're not sure whether or not you're on the right track, you can always make an appointment with a financial planner or tax professional who can make sure you're following all IRS guidelines.

Bottom line

Retirees who save several income streams may want to carefully plan how they withdraw their income each year. Even a small financial mistake, like withdrawing from the wrong account, can impact taxes, Medicare premiums, and RMDs in the future.

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