NUA and IRMAA: How the Distribution and Stock Sales Affect Your Medicare Premiums

The NUA election solves an income tax problem — but it can create a Medicare premium problem. The cost basis distribution adds ordinary income in the distribution year; two years later, that income shows up in your IRMAA calculation and can add $5,000–$13,000 in Medicare surcharges per person. The post-NUA stock sales have the same problem in every year you sell. Here's how the math works and what you can do about it.

How IRMAA works: the two-year lookback

IRMAA is a Medicare Part B and Part D surcharge added to your monthly premium when your income exceeds certain thresholds. The defining feature of IRMAA is its two-year lag: the surcharge you pay in 2026 is determined by your MAGI reported on your 2024 tax return.¹

For NUA planning, this lag creates a predictable exposure window. If you take your NUA distribution in 2026, the income spike from the cost basis distribution will appear on your 2026 tax return — and it will determine your 2028 IRMAA. You won't feel the premium hit until two years after the distribution.

Both the IRMAA tier thresholds and the base Part B premium reset annually. The 2026 IRMAA brackets are based on your 2024 MAGI:¹

Source: SSA POMS HI 01101.020 (published 12/02/2025); CMS 2026 Part B fact sheet; verified April 2026. Both spouses on Medicare pay independently — a married couple at tier 4 ($410K–$749K) each pays +$446.30/mo Part B and +$82.80/mo Part D = $1,058.20/month combined surcharge ($12,699/year). The tier thresholds shown are for 2026 IRMAA based on 2024 MAGI.

Two phases of NUA IRMAA exposure

An NUA election creates IRMAA exposure in two separate phases, often years apart:

Phase 1 — the distribution year

When you take the NUA lump-sum distribution, the cost basis of the transferred employer stock is recognized as ordinary income immediately.³ This is not NUA appreciation — it's the amount your employer contributed on your behalf over your career, reported in Box 6 of the 1099-R you receive.

That ordinary income goes straight into AGI and therefore MAGI. Two years later, the IRMAA surcharge kicks in.

Phase 2 — the post-NUA sale years

After the distribution, the stock sits in your taxable brokerage account. When you eventually sell shares, the appreciation is taxed as long-term capital gain. That LTCG is included in your AGI — and therefore in MAGI for IRMAA purposes — in the year of the sale.

Unlike Social Security (where only 50% of benefits count in provisional income), capital gains flow 100% into MAGI. For a $750K position of appreciated stock, selling it in a single year could add $750K to your MAGI, pushing you to the highest IRMAA tier and costing nearly $7,000 in extra Medicare premiums two years later. Even spreading the sale across 5 years at $150K/year can produce a sustained IRMAA surcharge in each of those years if your base income is already above a tier threshold.

The timing strategy: NUA before age 63

For retirees who have flexibility over when they take the NUA distribution, the clearest strategy to avoid IRMAA impact is timing the distribution so the two-year lookback window falls outside Medicare enrollment.

Medicare Part B starts at age 65. The first year's IRMAA is based on your income two years prior — your age-63 income. This means:

• NUA at age 62 or earlier: The spike year hits IRMAA at age 64 — before Medicare begins. No IRMAA impact on Medicare premiums at all.
• NUA at age 63: The spike lands in your first Medicare year (age 65 IRMAA based on age-63 income). One year of elevated premiums.
• NUA at age 64: The spike lands in your second Medicare year. One year of elevated premiums.
• NUA at age 65+: You're already on Medicare. The spike arrives 2 years after the distribution and can last as long as you're selling NUA stock.

If you retire at 65 and don't have the luxury of timing the distribution before age 63, the focus shifts from avoiding the IRMAA hit to managing it with post-distribution sale strategy.

Worked example: Robert and Carol

Robert (66) and Carol (65) both on Medicare. Robert has held company stock in his 401(k) for 27 years. Position: $1.8M in company shares; cost basis: $90,000 — a 20:1 appreciation ratio. Other income: Robert has a $110K pension; Carol has $55K in Social Security and a small IRA ($25K/year in distributions). Combined base income: approximately $190,000/year MAGI before any NUA-related income. They file MFJ.

Distribution year scenario

Robert takes the NUA distribution in 2026. The $90K cost basis is ordinary income:

• 2026 MAGI: $190K base + $90K basis = $280K. On MFJ returns, $280K falls in the $274,001–$342,000 IRMAA tier.
• 2028 IRMAA (based on 2026 income): Both Robert and Carol pay the Tier 2 surcharge. Part B: +$202.90/mo each = +$405.80/month combined. Part D: +$37.20/mo each = +$74.40/month combined.
• 2028 extra Medicare cost: approximately $5,765 above the no-IRMAA baseline, for one year.

Because Robert's appreciation ratio is 20:1, the basis is only $90K on a $1.8M position. The distribution year income spike is relatively modest — $280K MFJ lands at Tier 2, not the top tiers. This is the benefit of high appreciation: a smaller ordinary income hit in the distribution year.

Post-distribution sale scenario

The $1.71M of NUA appreciation (the $1.8M position minus the $90K basis) now sits in Robert's taxable account. He plans to sell over time. Consider three sale strategies:

Strategies to reduce NUA-related IRMAA exposure

1. Direct stock donations to charity

Donating NUA shares directly to a donor-advised fund (DAF) or charity eliminates the capital gain from MAGI in the donation year. A married couple donating $150K of appreciated NUA shares keeps $150K of LTCG out of MAGI — potentially saving them from crossing an IRMAA tier two years later. This is the most powerful single-year MAGI reduction tool once the NUA stock is in the taxable account.

2. Tranche selling with MAGI ceiling targets

Identify your MAGI tier threshold and sell only enough NUA stock each year to stay below it. With $190K of base income, Robert and Carol have $274,000 − $190,000 = $84,000 of room before crossing from Tier 1 into Tier 2. Selling $80K/year of NUA stock keeps them in the lower tier. At $80K/year, they'd need ~21 years to sell the full position — likely impractical — but even limiting sales in early years reduces cumulative IRMAA costs.

3. Use QCDs to offset base income (not the NUA stock itself)

Qualified Charitable Distributions (QCDs) let you transfer up to $111,000/year (2026 limit, per person) directly from an IRA to charity — excluding that amount from AGI entirely.⁴ While QCDs apply to IRA distributions (not NUA stock sales), they reduce your base income, which creates more room before the next IRMAA tier. If Robert's $110K pension is joined by $25K in IRA RMDs, converting that $25K distribution to a QCD keeps MAGI $25K lower — giving more headroom for NUA stock sales without triggering the next tier.

4. SSA-44 appeal for the distribution year

If your income dropped significantly compared to the IRMAA base year due to a qualifying life-changing event — including retirement (work stoppage) — you can file SSA Form SSA-44 to request that SSA use a more recent year's income instead of the two-year-old figure.⁵ If you took NUA in 2026 (income spike: $280K) but retired in 2026 and 2027 income is only $190K, you can appeal the 2028 IRMAA calculation to use your lower post-retirement income. The qualifying event is your work stoppage — not the NUA distribution itself. The appeal can reduce or eliminate the 2028 surcharge.

5. Roth conversion in the pre-NUA window

Roth conversions in lower-income years before the NUA distribution shrink your future pre-tax IRA balance, reducing future RMDs and IRA distributions that feed MAGI. Fewer future IRA distributions means lower base income, which gives more headroom for NUA stock sales without hitting IRMAA tiers. The sequence matters: convert Roth while income is low, then take NUA, then sell NUA stock within the resulting MAGI ceiling.

Does IRMAA change whether NUA makes sense?

For the typical NUA candidate — appreciation ratio of 8:1 or higher — IRMAA is a significant planning variable but rarely a dealbreaker.

Consider Robert's position: $1.8M of employer stock, $90K basis, 20:1 appreciation ratio. Even with the distribution year IRMAA cost ($5,765) and a decade of post-sale IRMAA costs, the NUA strategy saves far more than a rollover-to-IRA alternative. Rolling to IRA means $1.8M of future ordinary income distributions at 32–37% federal rates — potentially $600,000+ in federal income tax over time. IRMAA costs in the $50,000–$80,000 range over a decade are meaningful but don't reverse a $500K+ income tax advantage.

Where IRMAA can tip the decision:

• Low appreciation ratio (2:1 to 3:1): The absolute NUA tax advantage is thin. If IRMAA costs are large and multi-year, the net benefit of NUA narrows significantly. Run the full model including IRMAA.
• Married couple, both on Medicare, both in top IRMAA tiers: The maximum IRMAA exposure is ~$13,872/year for a couple. Sustained at this level for many years, this is a material cost that a competent advisor needs to include in the NUA vs. rollover comparison.
• Short life expectancy or forced immediate liquidation: If you must sell all NUA shares in a single year, the single-year IRMAA hit is one-time and may be absorbed more readily than a sustained higher tax rate on rollover withdrawals.

Sources

1. SSA POMS HI 01101.020 — IRMAA Sliding Scale Tables. Published 12/02/2025. 2026 IRMAA Part B surcharge tiers based on 2024 MAGI: $81.20 / $202.90 / $324.60 / $446.30 / $487.00 per person per month at tiers 1–5. Thresholds for single and MFJ filers as stated in the guide. Verified April 2026.
2. CMS: 2026 Medicare Parts A & B Premiums and Deductibles. Base Part B premium $202.90/month. Top IRMAA tier (MAGI ≥ $750,000 MFJ): total Part B premium $689.90/month per person. 2026 IRMAA Part D surcharges: $14.50 / $37.20 / $60.00 / $82.80 / $91.00 per person per month. Verified April 2026.
3. IRC § 402(e)(4) — NUA tax treatment. Cost basis of employer securities distributed in-kind from a qualified plan is included in gross income at distribution as ordinary income. NUA (appreciation over basis) excluded from gross income at distribution; recognized as LTCG when sold.
4. IRS: QCD rules under IRC § 408(d)(8). Qualified charitable distributions up to $111,000 per person in 2026 excluded from AGI. Applies only to IRA distributions (not taxable account sales). Must go directly from IRA to qualified charity. 2026 limit: $111,000 per person (inflation-adjusted). // Source: IRS Rev. Proc. 2025-28.
5. SSA Form SSA-44 — Medicare Income-Related Monthly Adjustment Amount — Life-Changing Event. Allows beneficiaries to request IRMAA reduction using a more recent year's income when a qualifying life-changing event (including work stoppage / retirement) has reduced income from the base year. Approved appeals use current or prior year MAGI instead of the two-year-ago figure.
6. IRC § 1411 — Net Investment Income Tax. LTCG from NUA stock sales is net investment income. MAGI used for both NIIT ($250K MFJ threshold) and IRMAA includes the same LTCG amounts — creating compounding cost in high-income sale years. NIIT threshold not inflation-adjusted; IRMAA thresholds inflation-adjusted annually.

IRMAA rules and surcharge amounts from SSA POMS and CMS guidance. NUA tax treatment under IRC § 402(e)(4). QCD rules under IRC § 408(d)(8). IRMAA values represent 2026 surcharges based on 2024 MAGI as published by SSA. Part D surcharges are added to plan premiums and vary slightly by plan; amounts shown are the IRMAA surcharge component only. Content is for informational purposes only. Values verified April 2026.