Grand Junction · IRMAA and capital gains
Do Long-Term Capital Gains Count Toward IRMAA in 2026?
Every fall a Mesa County couple sits down with a brokerage statement, a stock that has tripled, and a question their advisor did not answer: if we sell, what happens to Medicare? The answer is in one sentence of the Medicare statute, and it is yes. But the internet's favorite warning, that a gain "taxed at 0% still triggers IRMAA," does not survive the 2026 numbers. Here is what counts, what does not, where the real cliff sits, and the two-December trick that keeps a sale under the line.
The bottom line
- Yes, in full. 42 U.S.C. § 1395r(i)(4) defines IRMAA's income as adjusted gross income "increased by the amount of interest ... which is exempt from tax." Capital gains are already inside adjusted gross income, long-term or short-term, 0% or 20%.
- The 0% trap is smaller than advertised. For 2026 the zero-rate bracket ends at $98,900 of taxable income on a joint return ($49,450 single). Add the standard deduction and the most adjusted gross income a 0%-only household can have is about $131,100 joint or $65,550 single, far below the $218,000 and $109,000 IRMAA lines.
- The cliff lives in the 15% bracket. That bracket runs to $613,700 joint and $545,500 single, and every IRMAA line sits inside it. A $40,000 gain on top of $190,000 of income crosses the first line and costs a couple $2,296.80 in 2028, on top of $6,000 of federal tax.
- Two years later, twelve months long. 20 CFR § 418.1135 reads "the tax year 2 years prior," so a 2026 sale prices 2028 premiums and only 2028.
- No appeal for a sale you chose. § 418.1210 names "the ordinary risk of investment" as a non-event. The tool is timing: split the sale across two Decembers, harvest losses against it, or realize it inside a Roth.
Start with the definition, because it settles the question. The Medicare statute, 42 U.S.C. § 1395r(i)(4), says "the term 'modified adjusted gross income' means adjusted gross income (as defined in section 62 of the Internal Revenue Code of 1986) ... increased by the amount of interest received or accrued during the taxable year which is exempt from tax." Social Security's own regulation, 20 CFR § 418.1010(b)(6), restates it as "your adjusted gross income as defined by the Internal Revenue Code, plus" five kinds of tax-exempt income, tax-exempt interest first. Neither text mentions capital gains, and it does not need to. A gain from a sale goes on Form 8949, is summarized on Schedule D, and lands on line 7a of your Form 1040, several lines above adjusted gross income. It is inside the number before Medicare ever looks.
That is the whole answer for a stock, a mutual fund, a piece of ground on Orchard Mesa or a rental in Fruita: the gain counts, dollar for dollar. What the definition does not say is that every gain matters. IRMAA is a set of six income ranges with a cliff at each edge, and a gain only costs you if it is the dollar that crosses one. So the useful work is not asking whether gains count. It is finding where your household sits against the lines, and reading the capital-gains rate brackets against them.
What counts and what does not
| The gain | Toward IRMAA | How it is taxed |
|---|---|---|
| Long-term gain on stock, a fund, land or a rental (held more than one year) | Counts in full | 0%, 15% or 20% federal rate by taxable income |
| Short-term gain (held one year or less) | Counts in full | Ordinary income rates |
| Mutual fund or ETF capital gain distribution (Form 1099-DIV) | Counts in full | Always long-term, whether or not you sold anything |
| Gain on a main home inside the $250,000 / $500,000 exclusion | Does not count | Excluded from gross income under Pub. 523 |
| Gain on a main home above the exclusion | The excess counts | Long-term rates on the excess |
| A sale inside a traditional IRA or 401(k) | Not the sale | The withdrawal counts instead, as ordinary income |
| A sale inside a Roth IRA, or a qualified Roth distribution | Does not count | Not in gross income (Pub. 590-B) |
| Capital loss | Reduces gains first | Then up to $3,000 of other income; the rest carries forward |
Sources: IRS Topic 409 (holding period, rates, the $3,000 loss limit and carryforward); IRS Topic 404 ("Capital gain distributions are always reported as long-term capital gains"); IRS Publication 523; IRS Publication 590-B. Federal rates only; Colorado taxes the gain at its flat rate and Medicare ignores state tax entirely.
Three rows deserve a second look. The fund-distribution row is the one that surprises people, because no sale is involved: a mutual fund or exchange-traded fund that sold winners inside the portfolio passes the gain through on Form 1099-DIV, usually in December, and Topic 404 says those distributions "are always reported as long-term capital gains." A household that sold nothing all year can still cross a line on a fund's December payout. The IRA row cuts the other way: trades inside a traditional IRA or 401(k) never appear on Schedule D, so the gain itself is invisible to IRMAA, and only the withdrawal counts, as ordinary income, which our required-minimum-distribution post covers. And the loss row is the one lever that reduces MAGI directly: losses offset gains first, dollar for dollar, and Topic 409 lets "the lesser of $3,000 ($1,500 if married filing separately)" of any excess reduce other income, with the rest carried forward.
The 0% bracket and the IRMAA line are not neighbors
The warning you will read almost everywhere is that long-term gains taxed at 0% "still count toward IRMAA." That is true as a statement about the definition. As a statement about who gets hurt, it does not hold up in 2026, and the reason is arithmetic. Rev. Proc. 2025-32, section 3.03, sets the 2026 "Maximum Zero Rate Amount" at $98,900 of taxable income for married couples filing jointly and $49,450 for single filers. Taxable income is adjusted gross income after deductions, and section 3.14 of the same document puts the 2026 standard deduction at $32,200 joint and $16,100 single. So the most adjusted gross income a household can have while every dollar of its long-term gain is still taxed at 0% is roughly $131,100 on a joint return and $65,550 for a single filer, before the extra deduction for people 65 and over, which raises the ceiling further.
Now put those against the 2026 IRMAA lines: $218,000 joint, $109,000 single. A couple whose gain is entirely inside the 0% bracket is at least $86,900 of adjusted gross income short of the first cliff. A single filer is at least $43,450 short. A gain that pays no federal tax cannot, on its own, trigger a Medicare surcharge. What can happen is the mixed case: a household realizes a gain large enough that the first slice is taxed at 0%, the rest at 15%, and the total lifts MAGI over a line. But that is a 15%-bracket problem, not a 0% one, and the rest of this article is about that bracket.
One genuine exception. MAGI adds back tax-exempt interest and taxable income does not include it, so a household with a large municipal bond portfolio can have low taxable income and a MAGI much closer to a line than the bracket math suggests. We ran that case in our municipal bond post; if your line 2a is a five-figure number, read it before you harvest anything.
Where the cliff actually is: a Mesa County example
Take a Grand Junction couple with $190,000 of adjusted gross income in 2026: two pensions, the taxable share of Social Security, required distributions from an IRA. They are $28,000 under the joint line, in the 15% capital-gains bracket, which for 2026 runs from $98,900 to $613,700 of taxable income. They hold shares bought twenty years ago with a $40,000 unrealized gain, and they want the cash for a kitchen and a trip.
Sell it all in 2026 and MAGI is $230,000. Federal tax on the gain is about $6,000 at 15%. The Medicare cost arrives in 2028: they are in the first IRMAA tier, $81.20 a month on Part B and $14.50 on Part D, per person, so $95.70 each, $2,296.80 for the household for the year. The gain's real cost is $8,297, and the IRMAA piece is a 5.7% surcharge on a sale that was supposed to be taxed at 15%. The next line is $274,000, and a larger gain that crosses it too costs more than twice as much, because the second tier's Part B amount is $202.90 a month.
Now sell half in December 2026 and half in January 2027. If their other income holds steady, each year's MAGI is $210,000, under the line both times, and the federal tax is identical because the 15% rate does not care which year it is paid in. Same cash, same tax, $2,296.80 saved. The gap between the two outcomes is one calendar page, which is why the question to ask before any sale is not "how much is the gain" but "how far under the line am I this year, and next year."
Two more numbers sit in the same neighborhood. IRS Topic 559 adds a 3.8% net investment income tax on the lesser of net investment income or MAGI over $250,000 joint and $200,000 single, and "net gains from the disposition of property such as stocks, bonds, mutual funds, and real estate" are on its list. And the $218,000 IRMAA line and the $250,000 surtax line are $32,000 apart, so a couple sizing a sale to stay under one should check the other in the same pass. These are tax questions; run them with your tax advisor. The Medicare side, which tier a given MAGI lands in and what it costs, is what we do.
Planning a sale before year-end?
Bring last year's return and the gain you are considering to our Grand Junction office, or call. We will show you where the 2026 IRMAA lines fall against your income, what one tier costs a couple, and whether a two-year split keeps you under. Free, and nothing to sign.
Book an IRMAA check →Two years later, for twelve months, and no appeal
The timing is fixed by regulation. 20 CFR § 418.1135(a): "we will use your modified adjusted gross income provided by IRS for the tax year 2 years prior to the effective year." Your 2026 premium was set from your 2024 return; a gain you realize in 2026 sets 2028. The surcharge lasts the one premium year built on that return. In 2029 Social Security reads your 2027 return, and if that year was under the line the surcharge is gone. Nothing accumulates, nothing is owed back, and a one-time gain is a one-year premium.
What you cannot do is appeal it. Form SSA-44 lowers IRMAA only after a major life-changing event, and § 418.1210 is explicit that Social Security "will not consider events other than those described in § 418.1205," naming "events that result in the loss of dividend income because of the ordinary risk of investment" as an example of what does not qualify. The seven events that do qualify, death of a spouse, marriage, divorce, stopping or cutting back work, losing income-producing property, losing a pension, an employer settlement, are all things that happen to you. Selling a stock is something you did. Our Roth conversion post makes the same point about conversions, and the lesson is identical: the decision is made before the trade, not on a form afterward.
What I would do
Before any sale with a gain over about $20,000, pull last year's adjusted gross income and add what you expect this year, then lay it against $218,000 joint or $109,000 single. If the gain plus your income stays under the line, sell and stop reading. If it crosses, ask whether the sale can straddle December 31, whether you hold a loser that can be sold in the same year to offset it, and whether any of the position sits in a Roth, where a sale is invisible to both the IRS and Medicare. Check your funds' estimated December capital gain distributions in November, because that number lands on your return whether you act or not. And keep the whole thing in proportion: IRMAA is a premium, and in a county where 26.6% of adults live with high blood pressure and 8.1% with diabetes, per CDC PLACES, the plan you pick during Open Enrollment, October 15 to December 7, moves your costs more than which tier a stock sale puts you in. Get the sale timed, then get the plan right.
How we know all this: the Medicare On Main Data Desk frames every article with public data — here, 42 U.S.C. § 1395r(i)(4) and 20 CFR § 418.1010 for the definition of modified adjusted gross income, § 418.1135 for the two-year lookback, §§ 418.1205 and 418.1210 for what can and cannot be appealed, all quoted as published on Cornell LII; IRS Topics 409, 404 and 559 for holding periods, capital gain distributions, the loss limit and the net investment income tax; Rev. Proc. 2025-32 for the 2026 capital-gains rate amounts and standard deduction; the CMS fact sheet of November 14, 2025 for the 2026 IRMAA tiers; IRS Publications 523 and 590-B; and CDC PLACES county data (2023). The worked example is illustrative and uses only the basic standard deduction; your deductions, filing status and state tax differ. This is education, not tax advice; run any sale, loss harvest or Roth question with your tax advisor, and confirm plans, costs and eligibility with a licensed agent or Medicare.gov. We take no payment from any carrier to feature a plan.
Frequently asked questions
Do capital gains count toward IRMAA?
Yes. IRMAA is set from modified adjusted gross income, which 42 U.S.C. § 1395r(i)(4) defines as adjusted gross income "increased by the amount of interest ... which is exempt from tax." Every capital gain that reaches Schedule D and then line 7a of your Form 1040 is inside adjusted gross income, so it is inside MAGI. The only capital gains that do not count are the ones the tax code keeps out of gross income in the first place: gain on a main home inside the $250,000 single / $500,000 joint exclusion, and gains realized inside a Roth IRA.
Do capital gains affect Medicare premiums?
They can, two years later. Under 20 CFR § 418.1135, Social Security uses "the tax year 2 years prior" to set each year's premium, so a gain you realize in 2026 shows up in your 2028 Part B and Part D premiums. For 2026 the first IRMAA line is $109,000 for a single filer and $218,000 for a joint return; one dollar over adds $81.20 a month to Part B and $14.50 to Part D, per person, for the whole year. IRMAA is a set of cliffs, not a slope, so the question is never how big the gain is but whether it is the dollar that crosses a line.
Do long-term capital gains taxed at 0% still count toward IRMAA?
They count, but on the 2026 numbers a gain that is entirely inside the 0% bracket cannot reach the first IRMAA line by itself. Rev. Proc. 2025-32 sets the 2026 zero-rate ceiling at $98,900 of taxable income for a joint return and $49,450 for a single filer. Add back the standard deduction of $32,200 or $16,100 and the most adjusted gross income a household can have while still paying 0% is about $131,100 joint or $65,550 single, and that is well under $218,000 and $109,000. Larger deductions widen the gap further. The real IRMAA exposure is in the 15% bracket, which runs to $613,700 joint and $545,500 single, because every IRMAA line sits inside it. One exception: tax-exempt interest counts toward MAGI but not taxable income, so a household with large municipal bond income can be closer to a line than its taxable income suggests.
Does selling a house count as income for Medicare premiums?
Only the taxable part. IRS Publication 523 lets you exclude up to $250,000 of gain on your main home, or $500,000 on a joint return, if you owned and lived in it for two of the last five years. Excluded gain never enters adjusted gross income, so it never enters IRMAA. Gain above the exclusion, and any gain on a second home, a rental or land, is a long-term capital gain that counts in full. We wrote up the home-sale math separately; the short version is that a Grand Junction couple who bought in 1995 can clear $500,000 of gain with no Medicare consequence, and pay IRMAA on the dollar after that.
Can I appeal IRMAA if a capital gain pushed me over the line?
Generally no. Form SSA-44 works only after one of the seven major life-changing events in 20 CFR § 418.1205: death of a spouse, marriage, divorce or annulment, stopping or reducing work, loss of income-producing property, loss of pension income, or an employer settlement payment. Section 418.1210 adds that Social Security "will not consider events other than those" and names "loss of dividend income because of the ordinary risk of investment" as a non-event. Choosing to sell an appreciated asset is not on the list, so the surcharge from a gain stands for the year it applies. The lever is timing the sale, not appealing it afterward.
How long does a capital gain raise my Medicare premium?
Twelve months, for the one premium year built on that tax return. A gain realized in 2026 is on your 2026 return, which Social Security reads in late 2027 to set 2028 premiums; in 2029 it reads your 2027 return and the surcharge falls away if that year was under the line. For a couple crossing the first line, the cost is $95.70 per person per month, $2,296.80 for the year. Nothing carries over, and there is no interest or penalty; it is simply a higher premium for one year.
Sources
- 42 U.S.C. § 1395r(i)(4) — definition of modified adjusted gross income (Cornell LII) — "adjusted gross income ... increased by the amount of interest received or accrued during the taxable year which is exempt from tax."
- 20 CFR § 418.1010 — Definitions: modified adjusted gross income — "your adjusted gross income as defined by the Internal Revenue Code, plus" five forms of tax-exempt income.
- 20 CFR § 418.1135 — Which tax year Social Security uses — "the tax year 2 years prior to the effective year."
- 20 CFR § 418.1210 — What is not a major life-changing event — "loss of dividend income because of the ordinary risk of investment" is not a life-changing event.
- IRS Topic no. 409 — Capital gains and losses — "more than one year" = long-term; "some or all net capital gain may be taxed at 0%"; short-term gains taxed "as ordinary income"; the $3,000 loss limit and carryforward; Form 8949, Schedule D, line 7a.
- IRS Topic no. 404 — Dividends and other corporate distributions (capital gain distributions) — "Capital gain distributions are always reported as long-term capital gains."
- IRS Topic no. 559 — Net investment income tax — 3.8% on the lesser of net investment income or MAGI over $250,000 joint / $200,000 single.
- IRS Rev. Proc. 2025-32 — 2026 inflation adjustments (capital-gains rate amounts § 3.03; standard deduction § 3.14) — 2026 maximum zero-rate amount $98,900 / $49,450; maximum 15%-rate amount $613,700 / $545,500; standard deduction $32,200 / $16,100.
- CMS fact sheet — 2026 Medicare Parts A & B premiums and deductibles (IRMAA tables) — $202.90 standard premium; the $109,000 / $218,000 first line; $81.20 and $14.50 first-tier amounts.
- IRS Publication 523 — Selling your home — the $250,000 / $500,000 main-home exclusion.
- IRS Publication 590-B — Distributions from IRAs — qualified Roth distributions are not in gross income.
- SSA-44 — Medicare IRMAA life-changing event form — the life-changing-event request.
- CDC PLACES: Local Data for Better Health, County 2023 — Mesa County high blood pressure and diabetes prevalence.
