Does Rental Income Affect Medicare Premiums? IRMAA Explained

Published by CheckIRMAA · Sources checked October 25, 2026 · By Dennis Hartwell, senior revenue-cycle analyst. Not a CPA, financial adviser, insurance agent or Social Security representative.

Yes. Rental income counts toward the income Medicare uses to set your Part B and Part D premiums, but it's the net figure that counts, not the rent your tenants pay. Your profit or loss after expenses and depreciation flows from Schedule E into your adjusted gross income. Social Security generally uses the tax return from two years earlier, so rent you collect in 2026 can raise your 2028 premiums through IRMAA, the income-related monthly adjustment amount.

The details cut both ways. Ordinary expenses and depreciation can shrink a rental's contribution a lot, sometimes to a loss. But a rental loss only lowers your IRMAA income if the tax rules let you deduct it that year, first the at-risk rules and then the passive activity rules, whose allowance fades out as income rises. And unlike a one-time sale, rent comes back every year, so a rental can keep you over a line year after year.

Below I'll show where rent shows up on the return, two worked examples (one where depreciation kept a couple under the line, one where a rental loss did or didn't help), the special cases that change the math, and what you can and can't appeal.

Sources: IRS Publication 527; IRS Topic 415; Instructions for Form 6198; Instructions for Form 8582; Form 1040 (2025).

Rental income affects Medicare premiums only through IRMAA MAGI, which is your adjusted gross income (AGI) plus tax-exempt interest from the tax return Social Security uses (SSA POMS HI 01101.010). Social Security never sees your leases or your Schedule E. It gets your filing status, AGI and tax-exempt interest from the IRS, and the rent is already baked into the AGI.

If I could look at only one page of a landlord's return to understand their IRMAA, it would be Schedule E. That's where gross rent turns into the number that matters.

Two distinctions do most of the work here.

The first is gross rent versus net rental income. A house that rents for $2,500 a month brings in $30,000 a year, but that $30,000 isn't what Medicare sees. After property taxes, insurance, repairs, management and depreciation, the number that reaches your AGI might be half that, or less. People add their gross rent to their pension, scare themselves, and then make decisions off the wrong figure.

The second is AGI versus IRMAA MAGI. They're usually close, but municipal bond interest gets added back for IRMAA even though it's federally tax-free. My grandmother learned that one the hard way: tax-free isn't IRMAA-free. Our guide on how to calculate MAGI for IRMAA walks through every line.

There's a knock-on effect, too. To decide how much of your Social Security is taxable, the IRS looks at half your benefits plus your other income, and net rental income raises that figure. That can make more of your benefits taxable, up to the 85% maximum (IRS Publication 915). If only part of your benefit was taxable before, each extra dollar of rent can raise your AGI by more than a dollar.

This couple is hypothetical, and the numbers are there to show the arithmetic, not to predict anyone's premiums. They're both on Medicare and file jointly. Their pension, required IRA withdrawals, dividends and Social Security add up to $200,000 of AGI before the rental. (I'm assuming the taxable share of their Social Security is already at the 85% maximum, so the rent doesn't change it.) They own a paid-off house they rent for $2,500 a month.

Surcharges use the published 2026 amounts. Rent from 2026 would actually set 2028 premiums, and CMS hasn't published 2028 figures. The first column isn't a real way to file; it's the mental math many landlords do. Expenses: property taxes $4,300, insurance $1,700, repairs $2,900, management $2,400, other $500.

Done right, they land $4,800 under the $218,000 joint line. Skip the depreciation and they're $200 over it, which costs the two of them $2,296.80 for the year on 2026 rates. IRMAA is a cliff: one dollar over a line costs the same as being far over it.

Depreciation here is the building's cost spread over time. Residential rental buildings are generally depreciated over 27.5 years, and land isn't depreciated at all (IRS Publication 527). Their $5,000 for a full year corresponds to about $137,500 of building basis.

A rental loss lowers your IRMAA income only if you can deduct it that year. Two sets of tax rules decide that, in this order: the at-risk rules first, then the passive activity rules (IRS Publication 925). A loss that either set holds back is carried forward, and in the meantime it does nothing for your Medicare premiums.

Step 1: the at-risk rules (Form 6198)

The at-risk rules cap a deductible loss at what you actually stand to lose in the activity: the cash and adjusted basis of property you put in, plus money you borrowed for it that you're personally liable to repay or that's secured by other property you own (Instructions for Form 6198). For rental real estate, qualified nonrecourse financing secured by the property generally counts as at risk too.

That's why most people who own a rental directly, with or without an ordinary mortgage, never hit this limit. It matters mainly when part of the money behind the property is borrowed on terms you aren't personally responsible for and that don't count as qualified nonrecourse financing, such as nonrecourse seller financing or some partnership investments. If that's you and the rental shows a loss, Form 6198 applies, and any loss it disallows carries over to the next year. Only the loss that gets past the at-risk rules moves on to step 2.

Step 2: the passive activity rules (Form 8582)

Rental activities are generally passive (IRS Topic 425), and passive losses can normally offset only passive income. A loss you can't use is suspended and carried forward on Form 8582.

The common exception is the special allowance for rental real estate you actively participate in. Under the Form 8582 instructions:

• You can deduct up to $25,000 of rental losses against other income, whether you file single or jointly.
• The allowance shrinks by half of every dollar of income above $100,000 and disappears at $150,000.
• Married filing separately: up to $12,500, phasing out from $50,000 to $75,000, if you lived apart from your spouse all year. If you lived together at any time during the year, there's no allowance.
• Active participation is a lower bar than it sounds. Approving tenants, setting rents and approving repairs generally count. You must own at least 10% of the property, counting your spouse's share.

Two different "MAGIs," and why it matters

The income figure that controls the $25,000 allowance isn't the same MAGI Medicare uses. Mixing them up is one of the easiest mistakes to make here.

Sources: SSA POMS HI 01101.010; Instructions for Form 8582, line 6 (which also leaves out deductible IRA contributions and a few other items).

Because the allowance figure leaves out taxable Social Security, a retiree whose AGI is well above $100,000 can still have most or all of the allowance available.

Example: the same rental loss at three income levels

Another hypothetical. She's 67, single, on Medicare with Part B and Part D coverage, and delaying Social Security until 70, so none of her income is Social Security yet. She owns a condo she rents out and manages herself. After expenses and depreciation, the condo shows a $9,000 loss for the year. Here's what that loss does at three levels of pension and IRA income.

Allowance = the smaller of $25,000 or half of ($150,000 minus her allowance-MAGI). With no Social Security, deductible IRA contributions or other excluded items, her allowance-MAGI equals her pension and IRA income. Surcharges use 2026 individual-return amounts.

At $114,000, the loss pulled her under the $109,000 line entirely. At $140,000 she could use only part of it, but that part still dropped her a tier. At $160,000 the loss did nothing this year. It isn't wasted, though: suspended losses carry forward, and when you sell your entire interest in a fully taxable sale they generally become deductible (IRS Topic 425). If you're thinking about selling, our article on capital gains and IRMAA covers the sale year itself, and the section on selling a rental below has the short version.

The real estate professional exception

If you qualify as a real estate professional and materially participate in your rentals, those losses aren't treated as passive, and the $25,000 cap doesn't limit them. The test is strict. More than half of your personal services in all trades or businesses must be in real property businesses where you materially participate, and you need more than 750 hours of that work in the year (IRS Publication 925).

The half-of-your-services part is easier to meet once you've retired from a job, because you have no other work to compare against. The 750 hours and the material participation still have to be real and documented. If you think you might qualify, talk to a tax professional before relying on it, because it changes how your losses flow into AGI. The at-risk rules still apply.

Renting a room in your home

Rent from a boarder or a spare room is rental income too. You split shared costs like utilities, insurance and property taxes between the rented part and your own use; Publication 527 explains how to divide them. One warning that ties into a later sale: depreciation you take on the rented part of your home after May 6, 1997 can't be sheltered by the home-sale exclusion when you sell (IRS Publication 523).

A vacation home you also use

If you use a place as a home and rent it out for fewer than 15 days in the year, you don't report the rent at all, so it never reaches your IRMAA income (IRS Topic 415). Rent it longer and use it yourself for more than 14 days or 10% of the rented days, whichever is greater, and expenses are split by days of use and limited (Topic 415). The net still lands in AGI.

Short-term rentals

Two things change for short-term rentals like Airbnb. If guests stay seven days or less on average, the property isn't treated as a "rental activity" under the passive loss rules (Publication 925), so the $25,000 rental allowance doesn't apply. That doesn't make a loss automatically deductible. If you don't materially participate, the loss is still passive and can generally offset only passive income; if you do, it may offset other income, subject to the at-risk rules. And if you provide substantial services for guests' convenience, the income goes on Schedule C instead of Schedule E (IRS Topic 414), which can bring self-employment tax. Either way, net profit ends up in AGI and counts for IRMAA.

Rentals held through a partnership or LLC

Rental income or loss from a partnership, multi-member LLC or S corporation arrives on a Schedule K-1 and goes on Schedule E, Part II. It reaches Schedule 1, line 5 the same way your own rentals do (Schedule E). These are also where the at-risk rules most often come into play.

Advance rent and security deposits

Advance rent counts in the year you receive it, whatever period it covers. A security deposit you plan to return isn't income, but it becomes income if you keep it or it's meant as the final month's rent (Publication 527). That timing matters near a line: January's rent paid in late December lands in December's tax year.

The QBI deduction doesn't help IRMAA

Some rentals qualify for the qualified business income deduction. It's taken on Form 1040, line 13a, after AGI is figured (Form 1040 (2025)), so it can lower your income tax without lowering your IRMAA MAGI at all.

Turning your old home into a rental

Moving to a smaller place and renting out the house you're leaving starts a new stream of income that counts every year. It also starts a clock on the home-sale exclusion. Once you've been out of the house for more than three years, you can no longer meet the two-out-of-five-year residence test, and depreciation from the rental years can't be excluded when you sell (Publication 523).

When you eventually sell the rental, taxable gain and depreciation recapture are covered in does selling property affect Medicare premiums? This page stays focused on annual rental operations.

Cost segregation: faster depreciation, not less income

A cost segregation study splits a building's cost into parts that can be depreciated faster than the 27.5-year building schedule, mainly personal property such as appliances and carpeting, with 5- or 7-year recovery periods, and land improvements such as paving and fencing, with 15-year periods (IRS Cost Segregation Audit Techniques Guide). For qualified property acquired after January 19, 2025, 100% bonus depreciation can let you deduct those parts in the first year (IRS, IR-2026-06).

For IRMAA, that's a timing shift. The bigger deductions lower your net rental income now, but if they create a loss, the at-risk and passive rules above still decide whether it lowers MAGI this year. Above $150,000 of allowance income, it often won't. When you sell, the extra depreciation comes back as a larger gain, and the part taken on personal property is generally taxed as ordinary income. Either way, it raises MAGI in the sale year. A study costs money and needs a qualified preparer, so run the numbers both ways first.

The 3.8% net investment income tax is a different charge

Rental income can also trigger the net investment income tax. It's easy to confuse with IRMAA because both kick in at higher incomes, but they work differently, and the same rent can trigger both.

Sources: IRS Topic 559; IRS questions and answers on the NIIT; CMS 2026 fact sheet.

Selling a rental, and 1031 exchanges

Selling is a different event from collecting rent. The gain, including the part that comes from years of depreciation, generally lands in AGI in the year of the sale and can push you into a higher IRMAA tier for that one premium year. Suspended passive losses released by a full, taxable sale can soften it (IRS Topic 425). Frank's duplex sale, which I describe below, is the version of this I know best.

A 1031 like-kind exchange into other real property held for business or investment generally defers the gain instead of recognizing it that year, except for any cash or other non-like-kind property you receive (Instructions for Form 8824). It doesn't work for a home you live in, and it keeps you a landlord. Our guide to capital gains and IRMAA walks through the sale year in detail.

Social Security generally sets each year's premiums from the tax return two years earlier, and uses the return three years back only if the newer one isn't available yet (SSA POMS HI 01101.010). Our guide to the IRMAA two-year lookback covers the details.

That means the rent you collect at 63 can set your premiums at 65, your first Medicare year. If you're buying a rental or converting a house in your early sixties, the income will reach your Medicare years sooner than you might think.

On a joint return there's one MAGI for the couple, but each spouse enrolled in Medicare pays their own surcharge. If you're on Medicare and your spouse isn't yet, the same rent can cost one surcharge now and two once your spouse enrolls.

These are the official 2026 amounts, set from 2024 income, per person, per month. The Part B IRMAA column is the surcharge on top of the $202.90 standard premium. The Part D column is added to whatever your drug plan charges (CMS fact sheet, released November 14, 2025). IRMAA doesn't touch Part A; most people pay no Part A premium at all.

"Individual return" covers single, head of household and qualifying surviving spouse, plus married filing separately if you lived apart all year. If you file separately and lived with your spouse at any time during the year, CMS uses a harsher table: above $109,000 the Part B surcharge jumps to $446.30 and Part D to $83.30, and at $391,000 or more they're $487.00 and $91.00. The yearly column is Part B plus Part D surcharges, times 12.

Most of the income lines are adjusted for inflation each year, and CMS usually announces the next year's figures in the fall. As of October 25, 2026, the 2027 numbers hadn't been released, so treat the 2026 table as a guide for later years, not a forecast.

The thing that makes rental income different from a sale is that it repeats. Frank, my dad's pickleball partner, paid IRMAA for one year because he sold his rental duplex. A rental you keep can put you in the same tier every year until something changes, so the planning matters every December, not just once.

Usually not because of the rent itself. Social Security will swap in a more recent year's lower income only after one of the life-changing events on its list, and that list is exclusive (SSA POMS HI 01120.005). Ongoing rent isn't an event. Neither is a tenant moving out, a stretch of vacancy, a rent cut, or choosing to sell. SSA treats the ordinary risk of owning an investment as being at your own direction (SSA POMS HI 01120.035).

That leaves four situations where you do have options.

1. The rental was lost through no fault of your own

Loss of income-producing property is one of SSA's life-changing events, and rental homes are one of the examples SSA's manual gives. It counts only when the loss was beyond your control: a natural disaster such as a flood, hurricane, tornado, fire or earthquake, arson, theft including fraud, or a government buyout under eminent domain. A donation, gift, sale or transfer doesn't count (HI 01120.035).

If the loss significantly reduced your income, you can ask SSA to use a more recent year, usually with Form SSA-44. SSA accepts evidence such as an insurance claim, an adjuster's statement or a filed tax return showing the loss. If you weren't insured and the request is for the current year, SSA can accept your statement now and the filed tax return later. Investment fraud requires proof of a conviction.

2. Another life-changing event, with rent still coming in

Retiring, cutting back your hours, marriage, divorce or a spouse's death can each qualify if your MAGI has dropped enough to change your IRMAA level. A rental doesn't stop you from using one of those events. It does have to be in your estimate. If you retire but keep collecting rent, the newer-year income you give SSA must include your net rental income, and you attest under penalty of perjury that the event caused the drop (HI 01120.005). Our SSA-44 guide for retirees walks through the form.

3. Wrong or amended tax information

If the MAGI on your notice doesn't match line 11 (or 11a) plus line 2a of the return SSA used, or you've amended that return to fix a real error such as missed depreciation or expenses, SSA can make a new decision from the corrected figures. It needs the amended return plus the IRS receipt letter or a transcript, and the request generally has to come within three calendar years after the end of that tax year (SSA POMS HI 01120.045).

4. A formal appeal

If you think SSA calculated your IRMAA wrong, you can ask for reconsideration. You generally have 60 days from receiving the notice, and SSA assumes you received it five days after its date. You can contact SSA or use Form SSA-561 (SSA POMS HI 01194.020). SSA must accept an appeal even when the reason isn't a qualifying event (SSA POMS HI 01140.005), but if the original determination was correct, the surcharge usually stays.

One thing that surprises people: a vacancy may lower your premiums later, but not necessarily. If the rental sits empty all of 2026, your 2026 return shows less rental income, and your 2028 premiums are set from it. That helps only if the lower income drops you below a line, and you can't ask SSA to bring it forward.

Rent is predictable, which makes it easier to plan around than most income. Every December I tell people the same thing: know your MAGI to the dollar before the year ends, and leave a cushion of a few thousand dollars below the next line for surprises like a late dividend or a corrected 1099. The calculator above works with year-to-date numbers. None of these moves is right for everyone, and several have tax effects well beyond IRMAA.

• Claim every deduction you're entitled to. That includes depreciation, management fees, travel to the property and the right share of shared costs. Repairs are deducted in the year you pay for them; improvements are depreciated over years (Publication 527).
• Watch rent timing. Rent you receive in December counts in December's tax year even if it's for January. If you're close to a line, you may not want to accept January's rent early.
• Know your allowance figure, not just your AGI. If you expect a rental loss, figure the allowance-MAGI from the Form 8582 rules. A loss is worth much more for IRMAA when that figure is under $100,000 than when it's over $150,000.
• Don't stack other income on top. A rental already adds to your MAGI every year. A Roth conversion, a big IRA withdrawal or a year-end fund distribution can push you over a line the rent alone wouldn't. Our guide to RMDs and IRMAA covers the withdrawals you can't skip.
• If you're 70½ or older, consider qualified charitable distributions. Giving straight from your IRA to a charity keeps that money out of AGI, up to an annual limit (IRS Publication 590-B).
• Sometimes, pay it on purpose. A rental that pays you well may be worth a surcharge. The goal isn't zero IRMAA. The goal is no IRMAA you didn't choose.

I can show you where the lines are. Whether to change how you hold or run a rental is a conversation for you and a tax professional who can see your whole return.

If you already have an IRMAA notice, it shows the tax year SSA used, your filing status, AGI and tax-exempt interest. Check those against your own return first. If they match, the determination is almost certainly right.

I'll be straight with you. If rent is the reason you're paying IRMAA and nothing else has changed, the free check won't find a way around it, because Social Security's rules don't offer one. Better planning next December will do more for you than a form.

It helps when something else happened. Your rental burned or flooded and the income stopped. You retired and your wages went away, even though the rent didn't. You lost a spouse and the household income dropped. Those can be life-changing events under SSA's rules, if your income has fallen enough to change your IRMAA level since the year SSA used.

Does gross rent count toward IRMAA?

Not by itself. What counts is net rental income after expenses and depreciation, as figured on Schedule E and carried into your AGI.

Does rental income affect Medicare Part A?

No. IRMAA adds income-based surcharges only to Part B and Part D premiums. Part A isn't affected.

Does Airbnb or other short-term rental income count?

Yes. Whether it's reported on Schedule E or, with substantial services, on Schedule C, the net profit ends up in AGI. A short-term rental loss isn't automatically deductible: when average stays are seven days or less, the $25,000 rental allowance doesn't apply, and deductibility depends on whether you materially participate.

Does renting out a room in my house count?

Yes, the net rent counts. You split shared expenses between the rented space and your own use, and depreciation on the rented part can reduce your home-sale exclusion later.

Can a rental loss lower my Medicare premiums?

Yes, but only the part you can deduct that year after the at-risk and passive activity limits. With active participation you can generally deduct up to $25,000, phasing out between $100,000 and $150,000 of the allowance-MAGI described above. Suspended losses don't help until they're released.

Will my premiums drop if my rental sits empty?

Possibly, but not necessarily. Lower rental income shows up on that year's return, which generally sets premiums two years later, and it helps only if it drops you below an IRMAA line. A vacancy isn't a life-changing event, so SSA won't apply it sooner.

Is rental income subject to the 3.8% net investment income tax?

Often, yes, if your income is above $200,000 single or $250,000 joint. That's a separate tax paid with the same year's return, not part of IRMAA. See how the two differ.

Does rental income from an LLC or partnership count?

Yes. It arrives on a Schedule K-1, goes on Schedule E, Part II, and flows into AGI like any other rental income.

Dennis Hartwell is a senior revenue-cycle analyst at a hospital system and lives in Kettering, Ohio. His background includes an accounting degree, three tax seasons preparing returns at a CPA firm, and experience working with Medicare claims data. IRMAA became personal when a surcharge notice landed on his grandmother's kitchen table, and later when he helped his father with an SSA-44 request after retirement.

• What he does here: explains how tax-return income turns into Medicare surcharges, and links every rule to its official source.
• What he isn't: a CPA, financial adviser, insurance agent or Social Security representative. For decisions about your own return, talk to a tax professional.
• How this article was checked: every premium amount, income line and tax rule was checked against CMS, SSA and IRS sources on October 25, 2026, and the examples were recalculated. The examples are hypothetical.
• Independence: CheckIRMAA sells an optional SSA-44 preparation service. This article says plainly when that service won't help.

Read Dennis's story.

This article explains federal rules in general terms. It isn't tax, legal or financial advice, and the examples and calculator results are hypothetical illustrations, not predictions of anyone's premiums. Thresholds and premiums change every year; check the current CMS figures before you act, and talk to a tax professional about how your rentals are reported. The calculator runs in your browser and doesn't store or send what you enter. CheckIRMAA is independent of the Social Security Administration, CMS and Medicare.

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