IRMAA for Freelancers in 2026: How Your Schedule C Profit Sets Your Medicare Part B Premium Two Years Later

Published: October 13, 2026 · Reading time: 10 min

TL;DR: Medicare Part B costs a standard $202.90 a month in 2026, but if your modified adjusted gross income (MAGI) is above $109,000 on an individual return ($218,000 joint), you pay an income-related monthly adjustment amount (IRMAA) on top. The income used is generally from two years earlier, so your 2026 return generally sets your 2028 premium. For a freelancer, MAGI is mostly Schedule C profit minus above-the-line deductions, and the surcharge is a cliff: one dollar over $109,000 adds $81.20 a month, or $974.40 a year. In our worked example, a single freelancer with $140,000 of net profit ($130,109.32 AGI) puts $22,000 into a pre-tax solo 401(k), drops to $108,109.32, clears the cliff, and saves $3,872.00 of federal income tax plus $974.40 of Medicare surcharge: $4,846.40 in all. The thresholds and premiums here are the 2026 table, used as a stand-in; the dollar thresholds are inflation-adjusted, so the table for your own premium year will differ. This is general education; ask a CPA or EA about your situation.

Why a Freelancer Should Care About a Medicare Premium Years Before Enrolling

Most freelancers think about Medicare at 65. The tax planning has to start at 63, because Medicare does not price your premium from this year's income. It prices it from an old tax return.

The statute says that for an individual's premiums in a month in a year, the MAGI is "determined for the individual's last taxable year beginning in the second calendar year preceding the year involved". SSA's regulation says the same thing in plain terms: "In general, we will use your modified adjusted gross income provided by IRS for the tax year 2 years prior to the effective year of the income-related monthly adjustment amount determination." So the Schedule C profit you report on the 2026 return generally sets the premium you pay in 2028.

That timing is the whole planning problem. A lumpy freelance year, such as a big contract, a one-time sale of a business asset or a large Roth conversion, can raise a premium two years later, after the year is closed and nothing can be done about it. This guide covers the mechanics and the levers that are still open.

It is federal and Medicare-specific. For the Social Security side of retirement income, see what self-employment tax actually buys; for the unrelated 0.9% payroll surtax, see Additional Medicare Tax.

What IRMAA Is, in the CMS's Own Words

CMS publishes the numbers each year in a Federal Register notice. For 2026 it says the surcharge applies "if a beneficiary's modified adjusted gross income is greater than the legislated threshold amounts (for 2026, $109,000 for a beneficiary filing an individual income tax return and $218,000 for a beneficiary filing a joint tax return)". Below those amounts you pay the standard premium. Medicare.gov puts that premium at "$202.90 each month (or higher depending on your income)."

How this was verified: the 2026 Part B notice (Federal Register, November 19, 2025, document 2025-20251), the Cornell LII text of 42 U.S.C. §1395r, the 20 CFR part 418 sections cited here, and the Medicare.gov costs page were each fetched raw to a temporary file on October 13, 2026 and every quotation was found by exact search after normalising whitespace and apostrophes. A search-tool summary was not used as a source.

The 2026 tiers

The first three amount columns are copied from the CMS notice's full-coverage table; the last column is the monthly amount times 12, computed with node -e.

Three details that matter to a freelancer:

• It is per person. On a joint return both spouses enrolled in Part B pay the surcharge. Two enrollees in the $81.20 tier pay $81.20 × 12 × 2 = $1,948.80 a year.
• Married filing separately is punished. The notice has a separate table for people who are married, lived with their spouse at any time during the year and file separately: above $109,000 and below $391,000 the surcharge is $446.30 a month, and at $391,000 or more it is $487.00. See Married Filing Jointly vs. Separately before treating separate returns as a tax-saving move.
• These are 2026 amounts. The statute adjusts the dollar thresholds for inflation after 2007 (other than in 2018 and 2019), so the table that prices your premium year will have different breakpoints. Part D prescription drug plans carry their own income-related surcharge, which this guide does not model.

What Counts as MAGI

For Medicare, the statute defines MAGI as "adjusted gross income (as defined in section 62 of the Internal Revenue Code of 1986)", determined without regard to certain foreign-income and territory exclusions, and "increased by the amount of interest received or accrued during the taxable year which is exempt from tax under such Code."

For a typical Schedule C freelancer with no tax-exempt bond interest, MAGI is simply the AGI on Form 1040, which gives a clean planning rule:

• Items that lower AGI lower MAGI. Half of self-employment tax is deducted automatically. The self-employed health insurance deduction, the deduction for contributions to a SEP-IRA or solo 401(k), and the HSA deduction are all adjustments to income. See the self-employed health insurance deduction and SEP-IRA vs. solo 401(k).
• The QBI deduction does not lower MAGI. It is taken after AGI, which is why a freelancer can have a large 20% deduction and still sit in an IRMAA tier. See the QBI deduction.
• Income you choose to realize raises it. A Roth conversion adds to AGI; the low-income-year conversion guide covers the trade-off, and a qualified charitable distribution goes the other way for people old enough to use one.

Worked Example: Dana, Single, 63, $140,000 of Profit

Dana is 63, single, and a freelance consultant. In 2026 she plans to turn 65 in January 2028 and have Part B for all of 2028, so her 2026 return is the one that will price her first year of Part B (2028). Her only income is $140,000 of Schedule C net profit, with no tax-exempt interest. She takes the 2026 standard deduction of $16,100 and is a long way under the 2026 Social Security wage base of $184,500 (the SSA notice says it applies to "self-employment income earned in tax years beginning in 2026"). We compare doing nothing with a $22,000 pre-tax solo 401(k) employee deferral, which is below the 2026 elective-deferral limit of $24,500 (IRS Notice 2025-67) and assumes her plan is validly set up (see solo 401(k) limits and the adoption deadline).

Which bracket. Both columns land in the 22% bracket, which runs from $50,400 to $105,700 for an unmarried filer in 2026 (Rev. Proc. 2025-32). The deferral cuts taxable income by only $17,600, not $22,000, because it also lowers qualified business income and so the QBI deduction by $4,400. Dana's income-tax saving is $17,600 × 22% = $3,872.00. Self-employment tax is the same in both columns, since a retirement deferral does not reduce it.

The three §199A limits. (1) The SSTB phase-out and (2) the W-2 wage and property limit apply only above the 2026 threshold of $201,750 for filers other than joint, and Dana's taxable income before QBI is $114,009.32 or less, so neither applies. (3) The cap of 20% of taxable income (she has no net capital gain) is the one that binds in both columns, which is why the smaller figure is used.

The Medicare result. Under the 2026 table used as a stand-in:

• With no deferral, Dana's MAGI of $130,109.32 is $21,109.32 over the $109,000 threshold and sits in the $81.20 tier: $974.40 a year.
• With the deferral, her MAGI of $108,109.32 is $890.68 under the threshold, so the surcharge is $0.00. A deferral of about $21,110 would be the smallest that clears the line.

Dana's combined benefit is $3,872.00 + $974.40 = $4,846.40, about 22.03% of the $22,000. The $22,000 is not spent; it stays in her retirement account. She gives up access to it until retirement, and a pre-tax deferral is taxed when withdrawn, so a CPA or EA should confirm the deferral fits her cash flow.

Computed with node -e: SE tax 140,000 × 0.9235 × 0.153 = 19,781.37; AGI 140,000 − 9,890.685 − 22,000 = 108,109.315; income tax from the Rev. Proc. 2025-32 Table 3 formulas ($5,800 plus 22% of the excess over $50,400); IRMAA 81.20 × 12 = 974.40. Standard deduction, brackets and §199A thresholds were read from the raw Rev. Proc. 2025-32 PDF with pdftotext; the $24,500 limit from the raw Notice 2025-67 PDF; the $184,500 wage base from the raw SSA notice in the Federal Register (November 3, 2025).

What the example does not claim

The 2026 table is applied to 2026 income purely for illustration. The thresholds that price a 2028 premium will have been adjusted for inflation, so Dana's cushion could be larger or smaller. Test your own number against the table that applies when you get there.

Levers That Move AGI, and Their Limits

The point of the table is the third column: a lever that helps IRMAA can cost something elsewhere. A pre-tax deferral cuts QBI, and a deferral you cannot afford is not a saving.

When Income Actually Falls: Asking SSA to Use a Newer Year

The two-year lag works against you when your business shrinks. A freelancer who retires at 66 is priced on the income of a working year. The statute lets SSA use a more recent year at your request, and its regulation lists the events that count. The list includes "You or your spouse stop working or reduce the hours you work", along with marriage, divorce or annulment, the death of a spouse, certain losses of income-producing property, an employer pension plan ending and an employer settlement.

Two limits apply, both from the regulation:

• The reduction must be big enough to matter. The regulation says "a significant reduction in your modified adjusted gross income is one that results in the decrease or elimination of your income-related monthly adjustment amount." A small dip inside the same tier does nothing.
• Only listed events count. The regulation says "We will not consider events other than those described in § 418.1205 to be major life-changing events," and names "Events that affect your expenses, but not your income" as one that does not. Choosing to make a retirement contribution is not on the list, so the lever above works through the tax return, not through an SSA request.

For evidence, the regulation for stopping or cutting work accepts documents SSA can corroborate such as "proof of the transfer of your business, or your signed statement under penalty of perjury, describing your work separation or a reduction in hours." Keep the business wind-down paperwork: the final invoices, the closing of the business bank account and the record of the date you stopped. SSA decides each request and its process has its own forms and timing, so confirm the current steps with SSA before relying on this.

Verified from the raw text of 20 CFR §§418.1135, 418.1201, 418.1205, 418.1210, 418.1255 and 418.1265 on Cornell LII and 42 U.S.C. §1395r(i)(4)(C). SSA's own forms pages returned an access-denied response to our fetch tool, so the form name and current filing steps are not cited here.

Common Mistakes to Avoid

1. Reading the premium as a this-year problem. The income that prices 2028 is already closing in 2026.
2. Treating the threshold as a slope. At $109,001 you pay the whole $974.40, not a few dollars.
3. Counting the QBI deduction as a MAGI reduction. It is not.
4. Filing separately to dodge the table while still living with your spouse. The separate-filer table starts at $446.30 a month above $109,000.
5. Forgetting both spouses pay. A joint return puts the tier on each enrolled spouse.
6. Using a 2026 table for a 2028 decision without noting that the breakpoints move.
7. Making a retirement contribution without checking the plan exists and fits its limit.

Records to Keep

• The filed Form 1040 and Schedule C for every year that will price a premium, since SSA may ask for a copy to correct an error.
• The date and plan documents for any solo 401(k) or SEP you used to lower AGI.
• Records of the date you stopped or reduced work and the transfer or closing of the business. See how long to keep records.
• Premium statements for health and Medicare coverage, which also feed the self-employed health insurance deduction.

How CentSense Helps

CentSense is not tax software and does not compute IRMAA or MAGI. What it does is keep your Schedule C profit accurate, which is the largest input into both. AI receipt scans capture each business expense with its date and vendor, the mileage log records trips by date, and a CSV export hands your CPA clean year-to-date numbers to estimate where your AGI will land before December 31, when the levers above are still open. If you log mileage, remember that the 2026 standard rate is 72.5 cents through June 30 and 76 cents from July 1; check the dollar column of any single-rate export against the dates of your trips.

The free tier includes 10 AI receipt scans a month, and the Solo plan is $5/month for unlimited scans, mileage tracking and CSV export.

Frequently Asked Questions

What is IRMAA and does it apply to a self-employed person?

IRMAA is the income-related monthly adjustment amount, an extra charge added to the Medicare Part B premium when your modified adjusted gross income (MAGI) is above a threshold. It applies to anyone enrolled in Part B, including a Schedule C freelancer, because the test looks at the income on your tax return, not at how you earn it. For 2026 the CMS notice gives thresholds of $109,000 for an individual return and $218,000 for a joint return, and the standard Part B premium is $202.90 a month before any surcharge. Those are 2026 figures; the dollar thresholds are adjusted for inflation in later years, so check the notice for the year your premium is being set. Part D drug coverage has its own income-related surcharge that this answer does not cover. Ask a CPA or EA how your own return is likely to land.

Which year's income sets my Medicare Part B premium?

Generally the return from two years earlier. The statute says your modified adjusted gross income is determined for your last taxable year beginning in the second calendar year preceding the year involved, and SSA's regulation says it uses the tax year 2 years prior to the effective year. So your 2026 return generally sets your 2028 premium. If the IRS cannot supply that year's data, SSA can use the year before it instead, and it adjusts later. This describes the general rule only; a request based on a life-changing event, covered in a separate answer, can substitute a more recent year. Ask a CPA or EA how it applies to your enrollment date.

What counts as modified adjusted gross income for IRMAA?

The statute defines it as adjusted gross income, determined without regard to sections 135, 911, 931 and 933 of the tax code, increased by tax-exempt interest received or accrued during the year. For a freelancer with no tax-exempt interest and no foreign-income exclusions, MAGI is simply the AGI on Form 1040. That means deductions taken above the line, such as half of self-employment tax, the self-employed health insurance deduction and a deductible retirement contribution, reduce it. The qualified business income deduction is taken after AGI, so it does not. Confirm any unusual items, such as large tax-exempt interest or a Roth conversion, with a CPA or EA, because they change the figure.

How much can a few dollars over a threshold cost me in 2026?

A lot, because the surcharge is a cliff, not a slope. In the 2026 CMS table, an individual with MAGI of $109,000 or less pays no surcharge, while MAGI above $109,000 and up to $137,000 adds $81.20 a month, or $974.40 over twelve months. The next tiers add $202.90, $324.60, $446.30 and $487.00 a month. Joint filers have thresholds at double the individual amounts up to $410,000, then $750,000 for the top tier, and each spouse enrolled in Part B pays the surcharge. These are 2026 amounts; the thresholds are adjusted for inflation in later years, and Part D has its own separate surcharge. A CPA or EA can model where your return falls.

If I stop working or cut back my freelance business, can I get IRMAA reduced?

Possibly. SSA's regulation lists major life-changing events, including that you or your spouse stop working or reduce the hours you work, and you can ask SSA to use a more recent year's MAGI. The event must significantly reduce your MAGI, which the regulation defines as a reduction that decreases or eliminates your income-related monthly adjustment amount. Only the listed events count; the regulation says events that affect your expenses but not your income do not qualify, so choosing to make a retirement contribution or a Roth conversion is not an event. SSA asks for evidence, such as proof of the transfer of your business or your signed statement under penalty of perjury describing the reduction in hours. SSA decides each request, so confirm the process with SSA and a CPA or EA.

Does the QBI deduction lower my MAGI for Medicare?

No. MAGI starts from adjusted gross income, and the 20% qualified business income deduction is taken after AGI, when taxable income is computed. In the worked example, a single freelancer with $140,000 of Schedule C profit has an AGI of $130,109.32 and a QBI deduction of $22,801.86, yet the MAGI that counts toward IRMAA stays at $130,109.32. Only items that reduce AGI move you toward the $109,000 threshold. The QBI deduction still lowers your income tax. Its amount can also change when you make a retirement contribution, which reduces qualified business income; a CPA or EA can run both together.

Is it better to file separately to avoid IRMAA if I am married?

Usually not. The 2026 CMS notice has a separate table for people who are married, lived with their spouse at any time during the year, and file separately: MAGI above $109,000 and below $391,000 adds $446.30 a month, and MAGI of $391,000 or more adds $487.00 a month. A couple filing jointly with the same income would be in a much lower tier until it passes $218,000. Filing separately also changes many other tax results, so look at the whole return before choosing a status. These are 2026 amounts, and a CPA or EA can compare the filing statuses for your household.

Authoritative References

• CMS — 2026 Medicare Part B Premium, Deductible and Income-Related Monthly Adjustment Amounts (Federal Register, Nov. 19, 2025)
• 42 U.S.C. §1395r — Amount of premiums, including (i) Reduction in premium subsidy based on income (Cornell LII)
• 20 CFR §418.1135 — What modified adjusted gross income information will we use (Cornell LII)
• 20 CFR §418.1205 — What is a major life-changing event (Cornell LII)
• 20 CFR §418.1255 — Major life-changing event evidence (Cornell LII)
• Medicare.gov — What Part B costs
• IRS — Rev. Proc. 2025-32 (2026 standard deduction, brackets and §199A thresholds)
• IRS — Notice 2025-67 (2026 retirement plan limits)
• SSA — Cost-of-Living Increase and Other Determinations for 2026 (Federal Register, Nov. 3, 2025)

For related reading, see Roth Conversions in a Low-Income Year, Catch-Up Contributions After 50, the Senior Deduction for Self-Employed Filers, Quarterly Estimated Taxes and Self-Employment Tax Explained.

Know your profit before December 31. Start a free CentSense account, scan business receipts with AI, log mileage by date, and export your records to CSV so your CPA can plan your AGI while the year is still open. The free tier includes 10 AI receipt scans a month, no credit card required, and the Solo plan is $5/month for unlimited scans, mileage tracking and CSV export. CentSense does not provide tax or legal advice.

This guide is general education for U.S. freelancers planning for Medicare. It is not personalized tax advice. IRMAA amounts are from the 2026 CMS notice and the dollar thresholds change by year; SSA decides each IRMAA determination and each life-changing-event request. The worked example is federal only, assumes the stated facts (single, 63, turning 65 in January 2028 with Part B for all of 2028, $140,000 of Schedule C profit, no other income, standard deduction, a $22,000 solo 401(k) deferral within the plan's limits), and applies the 2026 table to 2026 income for illustration. A CPA or EA should confirm how your own return and enrollment date apply. Tax figures are from Rev. Proc. 2025-32 and Notice 2025-67 for 2026.