Could an annuity raise your Medicare premiums even if you haven’t taken money out? The key distinction is ownership versus taxable income. If you’re asking, are annuity earnings subject to IRMAA, the short answer is that the taxable portion of an annuity distribution may count toward the income used to determine IRMAA. The annuity’s account value alone isn’t the deciding figure. The type of annuity and how you receive money from it matter.
It’s understandable to feel unsure about which payments are taxable and when Medicare considers them. Qualified and nonqualified annuities can have different tax treatment, so distributions don’t all affect income in the same way. For 2026, IRMAA generally uses income reported on your 2024 tax return, reflecting Social Security’s two-year lookback.
This guide explains which annuity details may matter, how taxable distributions can affect IRMAA, and what to keep in mind about timing. You’ll also find practical steps for understanding your Medicare options without assuming every annuity or payment is treated alike.
Key Takeaways
- Are annuity earnings subject to IRMAA? Taxable annuity income may count, but simply owning an annuity doesn’t determine your Medicare adjustment.
- For 2026, IRMAA generally uses income from your 2024 tax return, so the timing of a distribution can matter.
- Qualified and nonqualified annuities may have different tax treatment. The type of contract and distribution can affect what counts as income.
- Gather your tax returns, annuity distribution records, and Medicare notices to identify which income year and figures are being used.
- Medicare plan comparisons are separate from calculating taxable annuity income. You can review plan options without assuming every annuity payment affects IRMAA.
Table of Contents
Are annuity earnings subject to IRMAA? The short answer
Yes, taxable income from an annuity may affect IRMAA if it is included in the income figure Social Security uses to determine your Medicare premiums. But owning an annuity, or seeing a balance in its account, doesn’t by itself mean you’ll pay an adjustment. The key details are how money you receive is taxed and the year it counts as income.
IRMAA is an income-related adjustment that can increase Medicare Part B and Part D premiums for people whose reported income is above the applicable limits. It isn’t a tax on an annuity or a charge based on its account value. It also doesn’t apply to every Medicare beneficiary or every annuity owner.
What IRMAA changes, and what it does not
IRMAA affects what a person pays for Medicare Part B and Part D. For 2026, the standard Part B premium is $202.90 per month. People whose income falls into an IRMAA bracket pay a higher Part B amount. For Part D, IRMAA is a separate surcharge added to the person’s plan premium. Whether an adjustment applies depends on the income information and thresholds used for that year.
This distinction can make the issue easier to understand: IRMAA is tied to income, not simply to having an annuity. It doesn’t reduce the annuity’s value or change the contract itself. Instead, taxable income may contribute to the calculation used to determine whether a Medicare premium adjustment applies.
Why annuity ownership alone does not settle the question
Separate three figures: the annuity contract’s value, the money distributed from it, and the portion of a distribution treated as taxable income. These aren’t always the same. A contract might have a substantial balance without a distribution in a particular year. If money is distributed, the taxable portion depends on the annuity’s tax status and how the payment is structured.
For the income calculation, Medicare uses Modified Adjusted Gross Income, or MAGI. For IRMAA, this generally means adjusted gross income from the tax return plus tax-exempt interest. So the question isn’t simply, “Do I own an annuity?” It’s whether a distribution created taxable income in the year Social Security considers.
That’s why the answer to “are annuity earnings subject to IRMAA” depends on your distribution and tax details, not on one rule for every contract. A taxable withdrawal could contribute to the relevant income total, while the account value alone doesn’t establish that it will. Timing matters, too: for 2026, Social Security generally uses income from the 2024 tax return. Your premium outcome depends on the income figures and filing status used in that determination. Start by identifying what was distributed, what was taxable, and which tax year Social Security considered.
How annuity income can enter the IRMAA calculation
An annuity payment doesn’t go straight from your bank account to a Medicare premium decision. Several steps connect the two, and keeping them separate can make the process easier to follow. For 2026, Social Security generally uses income from your 2024 federal tax return to determine whether an IRMAA adjustment applies.
For a 2026 IRMAA determination, Social Security generally uses income reported on your 2024 tax return. A taxable annuity distribution may therefore affect a later Medicare premium rather than the premium you pay when you receive it.
From annuity distribution to reported income
The path usually looks like this:
- You receive a distribution. The annuity’s contract type and the way you take money out help determine how the payment is taxed. A distribution may include taxable income, a return of after-tax principal, or both.
- The taxable amount is reported for tax purposes. The IRS receives the federal tax return, where taxable annuity income contributes to adjusted gross income (AGI). The exact taxable portion depends on the contract and distribution circumstances.
- Income is measured for IRMAA. For Medicare, the income measure is generally AGI plus tax-exempt interest. This is called Modified Adjusted Gross Income, or MAGI.
- Social Security makes the IRMAA determination. The Social Security Administration (SSA) uses IRS income information to determine whether an income-related adjustment applies. The Centers for Medicare & Medicaid Services (CMS) administers Medicare and sets the program’s premium structure.
For example, imagine you take money from an annuity in 2024. If some of that distribution is taxable, that portion may appear in your 2024 tax information and be considered in the 2026 IRMAA process. This example doesn’t tell you what your premium will be. Your filing status, total income, and the applicable thresholds also matter.
Don’t assume every dollar you receive is automatically taxable. Depending on the annuity and how it was funded, some of the payment may represent a return of principal rather than earnings. Your tax reporting and contract records can help show how the payment was classified. The comparison later in this guide explains how qualified and nonqualified annuities may differ.
Why the income year matters for 2026
SSA generally relies on tax information from two years earlier because that return is available for its determination. For 2026, that generally means the 2024 return is the starting point. A distribution you receive in 2026 doesn’t automatically change your 2026 IRMAA. Depending on the income year used, it may matter for a later determination instead.
Check the tax year named in your IRMAA determination notice. Compare it with the year of the annuity distribution and the income shown on that year’s return. This cross-check can help explain why a premium adjustment may not match your current income.
This timeline is separate from choosing Medicare coverage. A Medicare plan review can help you compare available plan options, while the taxable treatment of annuity income remains a separate tax question.
Qualified and nonqualified annuities: what differences may matter
An annuity’s tax status can help explain how a distribution is reported, but the label alone doesn’t determine your IRMAA outcome. What matters is the taxable amount included in the income figure used for Medicare, along with the tax year and your other income. This table is a general guide, not a substitute for your contract terms or the tax reporting for a specific payment.
| Annuity type or payment | General tax treatment | What may matter for IRMAA |
|---|---|---|
| Qualified annuity distribution | Funded with pre-tax money, often through a retirement account. Distributions are generally taxable as ordinary income. | The taxable amount generally contributes to income used in the IRMAA calculation. |
| Nonqualified annuity withdrawal | Funded with after-tax money. For a withdrawal before annuity payments begin, earnings are generally withdrawn before the original investment, so the withdrawal may be taxable until earnings are drawn out. | Any taxable amount reported as income may affect the relevant calculation. |
| Income payments from an annuity | Tax treatment depends in part on whether the annuity is qualified or nonqualified. A nonqualified annuity paid over time may use an exclusion ratio to determine the taxable and nontaxable portions. | The taxable portion, not automatically the full payment, is the amount that may enter income. |
Qualified annuities and distributions
A qualified annuity is generally funded with money that hasn’t yet been taxed, such as eligible retirement-plan funds. Because the contributions received pre-tax treatment, distributions are generally taxable as ordinary income. Reporting can still depend on the account and payment circumstances, so don’t assume every contract or transaction follows the same path. Review the tax forms and account records for the distribution year to see what was reported.
Nonqualified annuities and taxable portions
A nonqualified annuity is typically purchased with money that has already been taxed. That doesn’t make its earnings automatically tax-free. For withdrawals before a payout arrangement begins, federal tax rules generally treat earnings as coming out first. For certain periodic payments, an exclusion ratio may instead divide each payment between taxable earnings and a nontaxable return of the original investment. Which method applies depends on the contract and how payments are taken.
“Income annuity” describes how an annuity pays, not whether it is qualified or nonqualified. An income annuity can have either tax status, so its payments may be treated differently depending on how it was funded and structured. That’s why “are annuity earnings subject to IRMAA” can’t be answered from a product label alone. Review the distribution statement and tax reporting to identify the taxable amount. Don’t assume an annuity type is exempt from IRMAA.
If the taxable portion raises your income enough to trigger an adjustment, IRMAA can affect both Part B and Part D costs. The Part D adjustment is separate from your plan’s own premium. Learn more about Medicare Part D coverage. Comparing Medicare options is a separate step from determining the taxable amount of an annuity payment.

How to assess a possible annuity-related IRMAA change
An IRMAA notice can be hard to match to an annuity payment, especially if your income has changed since the tax year used for the decision. A step-by-step review can help you see which information Social Security relied on and what questions may need follow-up. Gather the documents before drawing conclusions.
Records to gather before reviewing your notice
Start with the documents that connect the distribution, tax reporting, and Medicare decision. You don’t need to share account numbers or other sensitive details for general educational guidance.
- Find the tax return for the year named in your IRMAA notice. Note your filing status and the income figures shown on the return.
- Gather annuity records for that same year. Look for distribution statements and tax forms showing payments and any taxable amount reported. If you took more than one distribution, gather records for each one.
- Read the Medicare premium determination notice. Identify the income year Social Security used, the filing status it applied, and the reason given for the adjustment.
- Compare the records. Check whether the notice’s income year matches the return you’re reviewing. Then see whether the annuity’s reported taxable amount appears consistent with your tax information.
For example, if a 2026 notice relies on an earlier return, compare the year stated in the notice with that return and the annuity records from the same year. Don’t assume a payment received this year caused a current-year premium decision. If the year or income figures don’t seem to match, follow the notice’s instructions to ask Social Security about the determination.
What to do if income has changed
A lower income today doesn’t automatically revise an IRMAA determination based on an earlier tax year. Social Security allows a request based on certain life-changing events that reduce income, including retirement or work stoppage, divorce, or the death of a spouse. A change in income by itself may not qualify. The SSA-44 form is used to request a new decision based on a qualifying event. Review its current instructions and eligibility details before submitting it.
Keep the questions distinct. Social Security handles the Medicare premium determination, while IRS rules and your annuity records inform how a distribution is treated for tax purposes. If you’re unsure what part of a payment was taxable, a Medicare plan review isn’t a substitute for tax guidance.
Once you’ve organized your records, you can separately review whether your Medicare coverage still fits your needs. Request a free Medicare review to compare available plan options. The review can help with Medicare choices, while questions about taxable annuity income remain separate.
Compare Medicare options with clear guidance, not assumptions
Once you’ve separated the annuity’s tax treatment from your Medicare choices, you can consider each question on its own. Annuity ownership alone doesn’t determine IRMAA. The taxable income reported for the relevant year and the timing of that income matter. Choosing or changing a Medicare plan is a separate decision and doesn’t remove or prevent an IRMAA adjustment.
Keep Medicare premium questions separate from annuity tax questions
For annuity questions, focus on the distribution, its taxable amount, and the tax year involved. For Medicare questions, review your coverage needs and the options available to you. If your notice includes a Part D adjustment, that surcharge is distinct from your plan’s own premium. Understanding Medicare Part D options can help you assess coverage, but plan selection doesn’t change how annuity income is reported or how IRMAA is determined.
Medicare Advantage is another coverage option to compare based on your needs and preferences. A Medicare Advantage guide can help you understand what to consider as you review your choices. Keep the decision grounded in the coverage itself, not in an assumption that switching plans will change an income-based premium adjustment.
Get personal help comparing Medicare plans
Paul B Insurance, operating as The Modern Medicare Agency, is an independent Medicare broker. The agency provides personalized comparisons of Medicare Advantage, Medigap, and Part D options from 40+ carriers. This support helps you understand and compare Medicare plan choices. It isn’t tax advice and doesn’t determine which part of an annuity distribution is taxable.
Before a review, make a short list of coverage questions: what type of Medicare coverage you have now, what you’d like to compare, and what matters most to you. If your concern is specifically about an IRMAA notice, keep the notice and your income records available for the appropriate Social Security or tax-related follow-up. Then consider your plan options separately, without assuming one decision settles the other.
For 2026, start by confirming the income year and taxable amount used for your IRMAA determination. Then review Medicare coverage based on your needs. The Modern Medicare Agency offers a free Medicare review by phone or Zoom to compare available Medicare Advantage, Medigap, and Part D options.
Take your next step with confidence
If you’re still asking, “are annuity earnings subject to IRMAA,” use your records and the relevant guidance to understand how your income was reported. For your Medicare choices, start by noting what kind of coverage you want to compare and the questions you’d like answered.
These are separate decisions, and you can take them one at a time. The Modern Medicare Agency is an independent Medicare broker offering personalized plan comparisons. A clear list of priorities can make it easier to approach your Medicare decisions with confidence.
When you’re ready to compare coverage, book a free Medicare review by phone or Zoom.
Frequently Asked Questions
Are annuity earnings subject to IRMAA?
They may be if the taxable portion is included in the income information used for your IRMAA decision. Owning an annuity alone doesn’t mean an adjustment applies. To understand whether are annuity earnings subject to IRMAA in your situation, compare the distribution’s tax reporting with the tax year named in your 2026 determination notice. Annuity contracts and payments can be treated differently, so review your records and current Social Security guidance.
Does IRMAA apply to Medicare Advantage plans?
IRMAA isn’t a separate surcharge set by an individual Medicare Advantage plan. It relates to Medicare Part B and Part D premiums. If you have Medicare Advantage, you generally still have Part B premium responsibilities, separate from any premium charged for your plan. Review your notice to see which Medicare charge it addresses. Changing plans doesn’t by itself remove or prevent an IRMAA adjustment.
Is IRMAA a tax on annuity income?
No. IRMAA isn’t a tax charged on an annuity payment. It’s an income-related adjustment to Medicare Part B and Part D premiums. Annuity income can be relevant if a taxable amount is included in the income used for the decision. That’s separate from whether you owe federal income tax on a distribution, which depends on the annuity’s tax status, payment structure, and your individual tax circumstances.
Does IRMAA apply to Medicare Part A?
IRMAA is generally associated with Part B and Part D premium adjustments, not a separate Part A IRMAA surcharge. That doesn’t describe every possible Medicare cost or eligibility situation. If you receive a 2026 notice, read the listed charges and explanation carefully to see which part of Medicare they concern. For questions about your specific determination, use the contact and review instructions included with the notice.
Can spouses’ annuity income affect each other’s IRMAA?
It can be relevant when spouses file a joint tax return, because filing status and household income are part of the information used for IRMAA. But one spouse’s annuity doesn’t automatically mean both spouses receive the same determination. Each person’s Medicare enrollment and the applicable income rules matter. Review the filing status and tax year on the return alongside each spouse’s notice, and check current 2026 thresholds before drawing conclusions.
Is IRMAA the same as a late enrollment penalty?
No. IRMAA is an income-related adjustment to certain Medicare premiums. A late enrollment penalty is connected to Medicare enrollment rules, not the income used for IRMAA. The two can appear in discussions of Medicare costs, but they have different reasons and should be reviewed separately. Check your 2026 notice to identify the charge being applied, and consult official Medicare information for guidance about your particular enrollment circumstances.
Can I challenge an IRMAA decision if my income has fallen?
You may be able to request a new determination in certain circumstances, but a lower current income doesn’t automatically qualify. Social Security’s SSA-44 process can apply after qualifying life-changing events, such as retirement or work stoppage, divorce, or a spouse’s death. Review the current form instructions for eligibility and required documentation. This request concerns the Medicare determination; it doesn’t decide how your annuity distribution is taxed or guarantee a premium change.
Article by
Paul Barrett
Paul Barrett, CMIP is the founder of The Modern Medicare Agency, an independent Medicare-only brokerage based in Melville, NY. With 18 years of Medicare-exclusive experience, a CMIP designation, and more than 5,000 clients served across 37 states, Paul is one of the most credentialed independent Medicare specialists on Long Island — and one of the most direct.
He represents 40+ carriers with no quotas and no allegiances, which means his recommendations are based entirely on what fits each client's specific situation. He is the author of Medicare Mastery Unlocked and host of the Wise Guys Retirement Talk podcast. His content is grounded in primary sources, real carrier intelligence, and 18 years of watching what happens when people get Medicare right — and when they don't.
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