Dividends count as income for Medicare premium calculations, and they can raise what you pay for Part B and Part D coverage
Medicare uses your Modified Adjusted Gross Income (MAGI) to set your monthly premiums for Part B (medical insurance) and Part D (prescription drug coverage). Dividend income — money you receive from stocks, mutual funds, or investment accounts — is included in that MAGI calculation. If your dividends push your income above certain thresholds, you will pay higher premiums, sometimes significantly higher.
The income limits change each year. For 2024, single filers with MAGI above $103,000 and married couples filing jointly above $206,000 start paying surcharges on top of the standard premium. The surcharge increases in steps as your income rises, and it can add $70 to $350 per month to your Part B bill alone, depending on how much dividend income you have.
Medicare looks back two years when calculating your income. If you received large dividends in 2022, those affect your 2024 premiums. This matters because you can request a recalculation if your income dropped in the current year — a process called an Income-Related Monthly Adjustment Amount (IRMAA) appeal.
Key Takeaways
- Dividend income is added to your other income to calculate your Medicare premium surcharges for Part B and Part D coverage.
- Medicare uses your income from two years ago, so 2022 dividends affect your 2024 premiums and 2023 dividends affect your 2025 premiums.
- If your dividend income dropped in the current year due to a life event, you can file an IRMAA appeal to lower your premiums without waiting for the next annual adjustment.
- may have access to dividends taxed at capital gains rates still count as ordinary income for Medicare purposes, even though they may have a lower tax rate on your federal return.
Which types of dividend income count toward Medicare premiums
All dividend income counts, regardless of how it is taxed on your federal income tax return. may have access to dividends — those that receive preferential capital gains tax treatment — still add to your MAGI for Medicare. Non-may have access to dividends taxed as ordinary income also count. Dividends from stocks, mutual funds, exchange-traded funds (ETFs), and real estate investment trusts (REITs) all factor into the calculation.
The source does not matter. Whether you receive dividends from a brokerage account, a retirement account that has been converted to a taxable account, or reinvested dividends that you never actually withdrew, Medicare counts them. If you own a business that pays you dividends, those count too.
One exception: dividends inside a traditional IRA or 401(k) do not count toward MAGI because the account itself is not taxable income until you withdraw money. Once you convert funds to a taxable account or take a distribution, the dividends become part of your income calculation.
How the income thresholds and surcharges work
Medicare divides filers into income brackets. Each bracket has a standard premium and a surcharge. For 2024, the brackets are:
| Filing Status | MAGI Range | Part B Surcharge |
|---|---|---|
| Single | $103,000 or less | $0 |
| Single | $103,001–$129,000 | $70.30 |
| Single | $129,001–$161,000 | $176.10 |
| Single | $161,001–$193,000 | $281.90 |
| Single | Over $193,000 | $350.70 |
| Married filing jointly | $206,000 or less | $0 |
| Married filing jointly | $206,001–$258,000 | $70.30 |
| Married filing jointly | $258,001–$322,000 | $176.10 |
| Married filing jointly | $322,001–$386,000 | $281.90 |
| Married filing jointly | Over $386,000 | $350.70 |
Part D (prescription drug coverage) has its own surcharge brackets that follow a similar structure. The surcharges stack — you pay both the Part B surcharge and the Part D surcharge if your income is high enough. These amounts change annually, usually increasing slightly.
The surcharge is added to your standard premium, not replacing it. In 2024, the standard Part B premium is $174.70 per month for most people. If you fall into the second income bracket as a single filer, you pay $174.70 plus $70.30, for a total of $245 per month.
The two-year lookback and why timing matters
Medicare does not use your current year income. Instead, it uses your MAGI from two years prior. Your 2024 premiums are based on your 2022 tax return. Your 2025 premiums are based on your 2023 tax return. This creates a lag that can catch people off guard.
If you sold a large investment or received a one-time dividend distribution in 2022, your 2024 premiums will reflect that spike even if your income dropped in 2023 and 2024. Conversely, if you had a major income drop in 2023, you will not see the premium reduction until 2025.
This lookback period is why an IRMAA appeal exists. If your income dropped significantly in the current year due to a life event — retirement, job loss, death of a spouse, divorce, or a substantial reduction in investment income — you can request that Medicare recalculate your premiums based on your current year income instead of waiting two years.
Filing an IRMAA appeal if your dividend income dropped
To request a recalculation, you file Form SSA-44 (Request for a Reconsideration of Social Security information) with Social Security. You must show that your income dropped due to a life event and provide documentation of the change.
A drop in dividend income alone — such as selling stocks at a loss or a company cutting its dividend — may not may have access to as a life event. Social Security looks for specific circumstances: retirement, loss of employment, death of a spouse, divorce, or a substantial reduction in business income. A market downturn that reduced your portfolio value does not typically may have access to, but selling a large investment portfolio to fund a move to a nursing home might.
You have until December 31 of the year following the year your premiums were set to file an appeal. If your 2024 premiums are too high, you can file through December 31, 2024. Include a copy of your current year tax return (or an estimate if you have not filed yet) and documentation of the life event. Social Security will review the appeal and notify you of the decision within 30 days.
Strategies to manage dividend income and Medicare premiums
If you are approaching Medicare age and have substantial dividend income, you have limited options to reduce the surcharge itself. Medicare counts dividends as income regardless of how you structure your investments. However, you can plan ahead.
Some people shift to dividend-free investments — growth stocks that do not pay dividends, or bonds held to maturity rather than bond funds that distribute interest. This reduces your MAGI. Others time large sales or distributions to occur in years when they are not yet on Medicare, or after they have already paid surcharges for a given year.
If you are married and one spouse has much higher dividend income, filing taxes separately might lower your combined MAGI, though this is rare and requires calculating both scenarios. Consult a tax professional before making changes, because the tax consequences of restructuring your portfolio may outweigh the Medicare savings.
For people already on Medicare, the two-year lookback means you cannot reduce this year's premiums by changing your investments now. But you can plan for future years and file an IRMAA appeal if a major life event reduces your income.
How to find your MAGI and estimate your surcharge
Your MAGI for Medicare purposes is not always the same as the MAGI on your tax return. For Medicare, MAGI is your Adjusted Gross Income (line 11 on Form 1040) plus any tax-exempt interest income. If you do not have tax-exempt interest, your tax return MAGI is usually your Medicare MAGI.
To estimate your surcharge, add up all your dividend income from your tax return (or your brokerage statements if you have not filed yet), then add it to your other income. Compare the total to the income brackets for your filing status. If you are unsure whether you will cross a threshold, contact Social Security at 1-800-772-1213 and ask them to estimate your 2024 or 2025 premiums based on your 2022 or 2023 income.
You can also review your Social Security Statement online at ssa.gov. It shows your estimated benefits and, once you are on Medicare, your estimated premiums based on the income data Social Security has on file.
Frequently Asked Questions
Do I have to report dividend income to Medicare when I first sign up?
No. Medicare automatically receives your income information from the IRS. When you turn 65 and sign up for Part B and Part D, Social Security uses your most recent tax return on file to calculate your premiums. You do not need to report anything yourself.
Can I reduce my dividend income by donating stock to charity?
Donating appreciated stock to a may have access to charity does not reduce your MAGI for Medicare purposes. The fair market value of the stock still counts as income in the year you donate it. However, you do avoid capital gains tax on the appreciation, which can save you money overall. Consult a tax advisor to weigh the Medicare and tax consequences.
What if I have dividend income but no other income — am I still subject to surcharges?
Yes. If your dividend income alone exceeds the threshold for your filing status, you will pay surcharges. For 2024, a single person with $110,000 in dividend income and no other income will pay a Part B surcharge because their MAGI exceeds $103,000.
Do Roth IRA dividends count toward my Medicare premiums?
Dividends inside a Roth IRA do not count. Roth accounts are not taxable income. However, if you withdraw money from a Roth IRA, that withdrawal counts as income for the year you take it, and it will affect your premiums two years later.
If I am married and my spouse has high dividend income, can I file separately to lower my premiums?
Filing separately may lower your combined MAGI, but it also changes your tax brackets and may eliminate deductions. You would need to calculate both scenarios — married filing jointly and married filing separately — to see which results in lower total taxes and Medicare premiums. A tax professional can help you model this.