IRMAA · Mesa County · Colorado's Western Slope

Does Selling a Business Count Toward IRMAA in 2026?

Yes, and the year you close is the year Medicare reads. But a business is not one asset. The recapture, the goodwill, the note and the consulting deal each hit your Medicare premium on their own schedule, and only one piece of the story can be appealed.

Medicare On Main Data Desk

Published October 18, 2026 · 9 min read · Reviewed by Brian Penner

Every owner who sells asks about capital gains tax. Hardly anyone asks about Medicare until the letter comes. It shows up about two years after closing, when Social Security reads the sale-year return and moves you into a higher premium tier for twelve months. We see it most with owners who built a trade business here: an HVAC or plumbing outfit, a ranch-supply store, a trucking company, a dental or veterinary practice, a small manufacturer out by the airport. These are people turning 65 at the same moment they hand over the keys, so their first Medicare years and their biggest tax year land together.

We have already covered the general capital-gains rule in its own post, and real estate in the house-sale post. A business is different. The IRS taxes it as a bundle of separate assets, and each one reaches Medicare differently.

A business sells as a bundle, and each piece is taxed differently

The IRS starts from a rule owners often don't expect: "The sale of a business is usually not a sale of one asset. Instead, all the assets of the business are sold. Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss" (Pub. 544). In an asset sale, buyer and seller divide the price among seven classes using the residual method and report the split on Form 8594. Cash comes first, then receivables, inventory and equipment, and whatever is left over falls to Class VII, "goodwill and going concern value" (Form 8594 instructions). That split controls "the gain or loss of the transferor" (§ 1060(a)). So it decides how much of your price is ordinary income, how much is capital gain, and how much can be deferred.

For Medicare, ordinary versus capital doesn't matter. Both are in adjusted gross income and both count dollar for dollar. What matters is which year each dollar is reported, because Social Security reads one tax year at a time and the tiers are cliffs. That is the reason for the table below.

Sources: IRS Pub. 544 · IRS Pub. 537 · Form 8594 instructions · 26 U.S.C. § 453 · § 1202 · 20 CFR § 418.1010. This table is general and simplified. Your CPA allocates your own sale.

Why the equipment piece hits hardest

The piece that catches western Colorado owners is the rolling stock. If you depreciated a fleet of service vans, a loader or a shop full of equipment, much of that write-off comes back as recapture when you sell. The IRS doesn't let you defer it: "you must report any depreciation recapture income in the year of sale, whether or not an installment payment was received that year" (Pub. 537). The statute says the same thing: "any recapture income shall be recognized in the year of the disposition" (§ 453(i)(1)(A)). Inventory works the same way: "The sale of inventories of personal property can't be reported on the installment method."

So even a carefully structured note leaves a floor under your sale-year income. That floor is the recapture plus the inventory plus whatever you earned that year before closing. For an equipment-heavy business, that floor alone can clear the $218,000 joint line before any goodwill is counted.

What a seller-financed note does, and doesn't, change

An installment sale is "a disposition of property where at least 1 payment is to be received after the close of the taxable year in which the disposition occurs" (§ 453(b)(1)). The IRS explains how each payment is treated: "Each payment on an installment sale usually consists of the following three parts. Interest income. Return of your adjusted basis in the property. Gain on the sale. In each year you receive a payment, you must include in income both the interest part and the part that's your gain on the sale" (Pub. 537).

For Medicare, that changes a single large spike into several smaller amounts. One high-tier year can become one middle-tier year followed by several years under the line. There are trade-offs:

• The interest is income every year. A note paying a market rate adds taxable interest on top of each year's gain.
• You become the bank. If the buyer stops paying, your security is the business you just sold. That is a credit decision for your attorney, not a Medicare one.
• Publicly traded stock is excluded. Pub. 537: "You can't use the installment method to report gain from the sale of stock or securities traded on an established securities market." Stock in a closely held company is a different case.
• Each later year is a separate test. With five payments you get five tax years, and each one has to stay under the line on its own.

A Mesa County sale, two ways

Here is an illustration, not a real client. A married couple filing jointly sell their Grand Junction service business in mid-2026. Their other income, including the taxable part of Social Security, interest and a small pension, is $70,000 a year. The business earned $90,000 for the months they ran it in 2026. The Form 8594 allocation produces $150,000 of equipment recapture and a $450,000 goodwill gain. Every number is an assumption. The tiers come from CMS's 2026 table, used as a stand-in for 2028 because the 2028 table doesn't exist yet.

Our arithmetic on the CMS 2026 IRMAA table: surcharge over the standard $202.90 Part B premium plus the Part D surcharge, times two people, times twelve months. Assumes both spouses have Medicare with drug coverage. The note interest is an assumed figure, and actual notes, rates and allocations vary.

The note saves about $4,600 in Medicare surcharges, but look at why the sale year is still expensive. With no goodwill at all, the couple's 2026 income would be $70,000 + $90,000 + $150,000 = $310,000. That is already in the third joint tier, $274,001 to $342,000, from income no note can move. The installment method only reaches the goodwill. Also note that $400,000 sits $10,000 under the next line at $410,000. If the actual numbers came in a little higher, a slightly smaller first payment would be worth more than any other change in the deal.

What you can appeal: stopping work, not the sale

Form SSA-44 lets Social Security use a newer, lower year when one of seven events causes a significant drop. Stopping work is one of them: "You or your spouse stop working or reduce the hours you work" (§ 418.1205(d)). Selling is not. The property-loss event is written to exclude it. It covers a loss "not at the direction of you or your spouse (e.g., due to the sale or transfer of the property)" and lists disasters, arson, livestock disease and fraud (§ 418.1205(e)).

In practice, the stop-work appeal fixes the premium years that read your working income. For our couple, 2026 premiums read 2024 and 2027 premiums read 2025, both full years of business profit. After they stop working in 2026, they can ask Social Security to use 2027's lower income for 2027 instead. The regulation requires that the event "results in a significant reduction in your modified adjusted gross income for the year which you request we use" (§ 418.1201(b)). Significant means the drop lowers your tier or takes you under the threshold (§ 418.1215).

The 2028 premium is harder. It reads the sale year itself. The regulation has no rule that sets aside a one-time gain because you also stopped working, and the drop after the sale year comes mostly from the gain ending, not from your paycheck ending. Social Security decides each case on its evidence. We tell owners to budget for the sale-year surcharge and treat any relief as a bonus. One more catch: if you stay on as a paid consultant to the buyer, that income keeps coming in every year, and it weakens the claim that you stopped working. Reduced hours is also a listed event, but the drop still has to be significant.

Two things that don't count at all

Excluded small-business stock gain. If you sell shares of a C corporation that qualify under § 1202, the statute says "gross income shall not include" the excluded portion of the gain (26 U.S.C. § 1202(a)(1)). Medicare's income measure is adjusted gross income plus tax-exempt interest, savings-bond interest used for tuition, and foreign and territorial income (§ 418.1010(b)(6)). An excluded stock gain is not on that list. The percentage you can exclude depends on when you got the stock and how long you held it, and whether your shares qualify is a question for your CPA. If they do, the excluded part does not touch your Medicare premium.

Your basis. The part of each payment that returns your adjusted basis is not income (Pub. 537). Your premium is set by the gain, never by the size of the check.

Grand Junction numbers

Sources: CMS 2026 fact sheet · Medicare & You 2027, p. 86 · CMS Medicare Monthly Enrollment · CDC PLACES, 2023 — via the Medicare On Main Data Desk.

Source: CMS — 2026 Medicare Parts A & B Premiums and Deductibles (Nov 14, 2025). Monthly amounts. The 2027 table follows in November. We update the 2027 lines here.

Before you sign a letter of intent

1. Ask your CPA for the sale-year AGI under each structure. Cash at closing, a note and an earn-out each give a different number. Put each one on the table above.
2. Look at the purchase-price allocation early. The Form 8594 split between equipment and goodwill decides how much income is locked into the sale year. Buyer and seller negotiate it, so it is not just paperwork.
3. Choose the closing date with both tax years in mind. Closing in January instead of December moves the whole spike back a year, and also moves the Medicare year it affects.
4. Price any consulting agreement as income. It counts toward IRMAA every year and can weaken a stop-work appeal.
5. File SSA-44 for the stop-work years as soon as the business is sold, with a careful estimate of next year's income (SSA). Tell Social Security if the estimate changes.
6. Budget for the sale-year surcharge as part of the deal costs, the same way you budget for the broker's fee.

Where these facts come from: the Medicare On Main Data Desk builds each article from public records. Here those are Social Security's IRMAA regulations at 20 CFR Part 418 (eCFR), 26 U.S.C. §§ 453, 1060 and 1202, IRS Publications 537 and 544, the Form 8594 instructions, CMS's 2026 premium fact sheet, the 2027 Medicare & You handbook, CMS county enrollment data and CDC PLACES. The sale example uses assumed figures. Social Security, not any plan or agent, decides IRMAA from your tax return. Deal structure, allocation and stock qualification are questions for your CPA and attorney. This is education, not tax or legal advice. Confirm Medicare figures with SSA, Medicare.gov or a licensed agent. No carrier pays us to feature a plan.