Covered Call Income and Medicare IRMAA: 2026 MAGI Planning Guide

IRMAA is a cliff-like premium schedule, not another tax bracket

Medicare's income-related monthly adjustment amount adds surcharges to Part B and Part D when MAGI crosses a filing-status threshold. Unlike a graduated income-tax bracket, crossing a threshold can move the beneficiary's entire monthly premium to the next tier. For a married couple where both spouses are on Medicare, the household effect can be twice the individual Part B increase plus two Part D adjustments.

Covered-call writers encounter IRMAA through recognized income. An expired or profitable closed call generally creates short-term capital gain; an assigned call generally folds premium into the stock sale proceeds. Unrealized stock appreciation and an open written call are not the same as recognized taxable gain. Forecast the tax return, not brokerage cash flow.

Official 2026 IRMAA table for most single and joint filers

These 2026 premiums generally use 2024 MAGI. SSA defines the relevant MAGI as adjusted gross income plus tax-exempt interest. The table above does not apply unchanged to married people who filed separately and lived with a spouse during the year; SSA publishes a separate table for that status. Always use the official chart for the premium year being calculated.

The two-year clock changes how you plan

The table is a planning map, not a promise that SSA will always use exactly two years. SSA uses the most recent federal return information available, generally two years prior and sometimes three. Future thresholds are indexed and unknown. A 2026 gain should be stress-tested against a range of possible 2028 thresholds rather than compared mechanically with the 2026 table.

Worked 2026 premium example

Assume a married couple filing jointly had 2024 MAGI of US$214,000 before recognized option activity. During 2024, expired covered calls and an assigned stock sale produced US$8,000 of net taxable gain after offsets, bringing MAGI to US$222,000. That is US$4,000 above the US$218,000 first-tier threshold used for 2026.

Each spouse's Part B premium becomes US$284.10 instead of US$202.90, an annual household difference of US$1,948.80: (US$284.10 − US$202.90) × 12 × 2. The Part D adjustment adds US$348 if both have drug coverage: US$14.50 × 12 × 2. Total incremental household cost is approximately US$2,296.80, before the underlying plan premiums and income tax on the gains. The marginal cost of the last dollars crossing the line is therefore much larger than their income tax alone.

What can legitimately change the result

Tax timing should never be the only reason to keep a deteriorating stock or extend an option obligation. Compare the full investment outcome with the surcharge. It can be rational to cross an IRMAA tier for a much larger economic gain; the mistake is crossing accidentally because the stock basis, assignment gain, or two-year lookback was never modeled.

• Capital losses can offset capital gains under the normal tax rules; use net recognized results, not gross premiums.
• Closing or expiration dates control the recognition year for many written calls; cash receipt alone does not.
• Assignment can realize a large embedded stock gain in addition to the option economics.
• Tax-exempt municipal-bond interest is added back for IRMAA even though it is excluded from federal AGI.
• SSA-44 relief depends on a listed life-changing event and evidence, not merely on regretting a profitable year.

Year-round IRMAA workflow for option writers

Maintain a MAGI forecast that starts with pensions, wages, Social Security included in AGI, retirement distributions, interest, dividends, and net capital gains. Add projected option expirations, closes, and assignments by recognition year. Keep a buffer below any planning threshold because dividends, mutual-fund distributions, and year-end option outcomes can change.

At year end, reconcile the forecast to Form 1099-B and the tax return. When SSA later issues a determination, verify that it used the correct tax year and filing status. If a qualifying life-changing event reduced income, review Form SSA-44 and the required evidence. The linked tax, income, assignment, and RMD calculators can organize scenarios, but only the official SSA table and the filed return determine the premium outcome.