IRMAA-Aware Tax Planning for Retirees
Avoid the IRMAA cliff and Roth conversion regret. Fiduciary tax planning for retirees, fee-only. Annapolis MD — virtual nationwide.
The tax return you file in April is a receipt. Every number on it was set by decisions made months or years earlier. Tax planning is the work of making those decisions on purpose, across years, instead of discovering their cost after the fact.
Retirement concentrates the opportunity. Between the last paycheck and the first required minimum distribution, many households pass through their lowest-income years in decades. What you do with that window, conversions, gain harvesting, charitable structuring, can shape your tax bill for the rest of the plan.
We do not prepare returns. We plan the moves, model them against brackets, Medicare surcharges, and each other, and coordinate execution with your CPA. This is not for every household. If your income is flat and simple, there may be little to optimize. For most of the retirees we serve, there is plenty.
Multi-year bracket management
Single-year tax advice optimizes the wrong thing. The question is not how to minimize this year's bill. It is how to minimize the total tax paid over the next ten to twenty years, which sometimes means deliberately paying more now.
The mechanics start with a multi-year income projection: wages winding down, portfolio income, Social Security start dates, and the RMDs waiting at the end. Retirement often creates a valley, several years of unusually low taxable income. Left alone, the valley is wasted and the RMD years tower over it. Filled deliberately, with conversions or realized gains, the whole income path flattens and less of it lands in the top brackets.
The Roth conversion window
A Roth conversion moves money from a tax-deferred IRA to a Roth IRA and puts the tax due on this year's return. The bet is straightforward: pay tax at today's known rate to avoid tomorrow's higher one. The window between retirement and RMDs is where that bet is most often favorable, because your bracket is temporarily low and every dollar converted shrinks future RMDs.
Execution details decide whether it works. We size conversions to the top of a target bracket rather than converting all at once. We prefer paying the conversion tax from taxable accounts so the full amount lands in the Roth. And we check each conversion against the Medicare surcharge thresholds, because a conversion that saves bracket tax and triggers a later year of higher premiums may not be a win.
Sources: IRS: Roth IRAs
The IRMAA cliff
Medicare premiums are means-tested through IRMAA, the income-related monthly adjustment amount, and the test uses your tax return from two years back. Your 2026 premiums are set by your 2024 income. Planning has to look ahead, because the damage is done long before the premium notice arrives.
IRMAA is a cliff, not a slope. For 2026, the first surcharge tier begins above $109,000 of MAGI for single filers and $218,000 for married filing jointly. One dollar over the line triggers the full surcharge for the year, for each enrolled spouse. We model every conversion, gain harvest, and large withdrawal against these thresholds, and in many plans we deliberately leave a margin below the line rather than steering to it exactly.
Sources: Social Security Administration: Medicare premiums and IRMAA · Medicare.gov: Medicare costs
Harvesting gains at the capital gains breakpoints
Long-term capital gains have their own bracket schedule, and the bottom rate is zero. In low-income years, a married couple can realize a meaningful amount of long-term gain and pay nothing in federal tax on it, resetting cost basis upward in the process. Selling and immediately repurchasing is permitted for gains. The wash sale rule applies only to losses.
Gain harvesting competes with Roth conversions for the same low-bracket space, and the two interact: conversion income can push gains out of the zero bracket. We treat each year's bracket room as a budget and allocate it to whichever move the long-range model says is worth more, rather than running both and spoiling each.
Qualified charitable distributions after 70 and a half
A QCD sends money directly from your IRA to a qualified charity. The distribution never appears in your adjusted gross income, and once RMDs begin it counts toward the requirement. For households taking the standard deduction, this beats writing a check, because the check earns no deduction while the QCD removes the income entirely.
Keeping the income out of AGI also protects the downstream numbers that key off it, including the IRMAA thresholds and the taxation of Social Security. The annual per-person ceiling is generous, indexed for inflation, and rarely binding for the households we serve. For charitable households past 70 and a half, the QCD is usually the first tool we reach for, ahead of donor-advised funds and appreciated stock gifts, though we model all three.
Sources: IRS: Retirement plans FAQs regarding IRA distributions
Tax-loss harvesting, and its real limits
Selling a losing position, capturing the loss, and moving into a similar but not substantially identical holding keeps your market exposure while banking a deduction. Losses offset capital gains without limit, and unused losses carry forward indefinitely.
The limits matter as much as the benefit. Only a small fixed amount of net loss can offset ordinary income each year; the rest carries forward. The wash sale rule disallows the loss if you buy a substantially identical security within 30 days before or after the sale, including in an IRA or a spouse's account. And in many cases harvesting defers tax rather than erasing it, since the replacement shares carry a lower basis. Useful, worth doing systematically, and not the centerpiece some marketing suggests.
Sources: IRS: Publication 550, Investment income and expenses · IRS: Topic 409, Capital gains and losses
Related Reading
Frequently Asked Questions
Do you prepare our tax return?
No. We do the planning and modeling, then coordinate directly with your CPA so the return reflects the plan. If you do not have a CPA, we can tell you what to look for in one.
When do Roth conversions make sense?
Most often in the window between retirement and RMDs, when your bracket is temporarily low. They are not automatic. If you expect permanently lower income, or you plan to leave most of the IRA to charity, converting can be the wrong move. We model it household by household, year by year.
Can tax planning backfire on our Medicare premiums?
Yes. IRMAA uses a two-year lookback, so a large conversion or capital gain today can raise premiums two years from now. That is exactly why every move gets checked against the surcharge thresholds before it is executed, not after.
Is there a deadline for these moves?
Most of them run on the calendar year, and conversions are irrevocable under current law. So the heavy sizing work happens in the fall, when the year's income picture is clear enough to fill brackets deliberately without spilling over a threshold.
We give to charity every year. Does that change the plan?
Usually, yes. Past 70 and a half, QCDs from the IRA are often the most efficient route. Before that, gifts of appreciated stock or bunching several years of giving into a donor-advised fund can beat writing checks. We model the options against your bracket path.