A $150,000 capital-gain distribution from an unsold fund lifted a couple’s income above IRMAA thresholds, triggering annual Medicare fees.
A retired couple received a $150,000 capital-gain distribution from a mutual fund they never sold, pushing their modified adjusted gross income into the $274,000–$342,000 range. Medicare’s income-related monthly adjustment amount (IRMAA) surcharge added roughly $7,000 to their annual costs.
The couple, holding $700,000 in the fund since the 1990s, saw the payout automatically reinvested. Such distributions, often called phantom income, can occur when fund managers sell appreciated holdings, forcing taxable events for shareholders regardless of personal sales.
Their total portfolio of $2.1 million includes IRAs, a Roth, and the taxable account. Advisers recommend checking fund distribution estimates in November to avoid similar IRMAA cliffs.