Yes, dividends count as income for Medicare premium calculations, and they can raise what you pay each month

Medicare uses your income to set your monthly premiums for Part B (doctor visits) and Part D (prescription drugs). Dividends from stocks, mutual funds, and other investments are counted as income on your tax return, and Medicare uses that same tax return to determine your premiums. If your dividend income pushes your total income above certain thresholds, you will pay a higher premium — sometimes significantly higher — than someone with the same income from wages.

The income figure Medicare looks at is called Modified Adjusted Gross Income (MAGI), and it includes wages, Social Security, pensions, interest, capital gains, and dividends. There is no separate category that excludes dividends. If you received a 1099-DIV form from your brokerage or mutual fund company, that income went into your tax return, and Medicare sees it.

Key Takeaways

  • Dividend income is added to your total income for Medicare premium purposes, using the same figure from your tax return.
  • If your income exceeds $97,000 (single) or $194,000 (married filing jointly) in 2024, you pay a higher Part B premium; thresholds are higher for Part D.
  • Medicare uses your tax return from two years prior, so 2024 premiums are based on your 2022 income.
  • If your income drops significantly — such as after retirement or a major sale — you can request a recalculation using your current-year income instead.
  • may have access to dividends taxed at capital gains rates still count as income for Medicare, even though they may be taxed lower on your return.

How Medicare calculates your premium based on income

Medicare Part B premiums increase in brackets. For 2024, a single person with Modified Adjusted Gross Income of $97,000 or less pays the standard premium (around $175 per month). Each income bracket above that triggers a higher premium, reaching roughly $560 per month for income over $500,000. Married couples filing jointly face the same brackets but at double the income thresholds.

Part D premiums work similarly but with different thresholds. Income-related adjustments begin at $97,000 for single filers and $194,000 for married couples in 2024. The exact premium increase depends on your specific plan, but the principle is the same: higher income means higher out-of-pocket costs.

The income Medicare uses is always from your federal tax return filed two years earlier. So in 2024, Medicare is looking at your 2022 tax return. This two-year lag matters because it means a major change in your dividend income — such as selling a large investment or starting to receive distributions from a retirement account — will not affect your premiums until two years later.

What counts as dividend income on your Medicare calculation

Any dividend you report on your tax return counts toward your Medicare income. This includes ordinary dividends (taxed as regular income), may have access to dividends (taxed at capital gains rates), and reinvested dividends. It does not matter whether you took the money out or left it in your account — if it appears on your 1099-DIV, it counts.

Return of capital distributions, which are sometimes listed separately on a 1099-DIV, do not count as income for tax purposes and therefore do not count for Medicare either. However, most dividend-paying investments issue ordinary or may have access to dividends, not return of capital. If you are unsure whether a particular distribution counts, check your 1099-DIV or ask your tax preparer.

Capital gains from selling stocks are also counted in your Medicare income calculation, even though they are taxed differently than dividends. If you sold an investment at a profit in the year Medicare is reviewing, that gain is part of your Modified Adjusted Gross Income.

When dividend income triggers a premium increase

The income thresholds that trigger higher premiums are adjusted each year for inflation. In 2024, the first threshold for Part B is $97,000 for single filers and $194,000 for married couples filing jointly. Each bracket above that — typically in $20,000 increments — carries a higher premium. The highest earners can pay three or four times the standard premium.

If your dividend income alone does not push you over a threshold, but combined with your other income (wages, Social Security, pensions, interest) it does, then you will pay the higher premium. There is no way to exclude dividend income or to lower your Medicare premiums by choosing not to take dividend distributions.

Some people find that taking Social Security at a certain age, combined with dividend income, crosses a threshold they would not have crossed otherwise. Planning the timing of large one-time events — such as selling an investment property or taking a lump-sum pension distribution — can sometimes help, but ongoing dividend income is harder to manage because it recurs each year.

How to request a recalculation if your income has dropped

If your income was significantly higher two years ago but has dropped now — for example, because you retired or sold a major investment — you can ask Social Security to recalculate your Medicare premiums using your current-year income instead. This is called a Life-Changing Event request.

To request a recalculation, contact Social Security at 1-800-772-1213 or visit your local Social Security office. You will need to explain the change in income and provide documentation, such as a recent tax return, a letter from your employer showing reduced hours, or proof that an investment was sold. Social Security will review your request and, if approved, adjust your premiums going forward.

This recalculation does not happen automatically. Many people do not know they can request it, so their premiums stay high even after their income has dropped. The request must be made in the year the change occurred or shortly after; Social Security has limits on how far back they will look.

Planning around dividend income and Medicare costs

If you are approaching Medicare age and have significant dividend income, it is worth reviewing your investment strategy with a tax professional or financial advisor. Some people shift toward investments that generate less current income — such as growth stocks that do not pay dividends, or tax-deferred accounts — to reduce their Medicare premiums. Others accept the higher premiums as a cost of the income they need.

Roth conversions, charitable giving strategies, and the timing of large sales can all affect your income in ways that matter for Medicare. These decisions are personal and depend on your overall financial picture, not just Medicare costs. But understanding that dividends count as income — and that they can raise your premiums — is the first step in making an informed choice.

If you are already on Medicare and your dividend income has changed, do not assume your premiums are locked in. A significant drop in income may may have access to you for a recalculation, and it is worth asking.

Frequently Asked Questions

Do I have to pay higher Medicare premiums if I have dividend income?

Only if your total income (including dividends) exceeds the threshold for your filing status. In 2024, that threshold is $97,000 for single filers and $194,000 for married couples filing jointly for Part B. If you are below the threshold, dividend income does not raise your premium.

Can I avoid the premium increase by not taking my dividends?

No. Reinvested dividends count as income whether you withdraw them or not. The 1099-DIV issued by your brokerage reports the full amount, and that is what Medicare sees on your tax return.

What if my dividend income was high two years ago but I have no income now?

You can request a recalculation from Social Security using your current income. This is called a Life-Changing Event request and requires documentation of the change. Contact Social Security at 1-800-772-1213 to start the process.

Are may have access to dividends taxed differently for Medicare than ordinary dividends?

may have access to dividends may be taxed at a lower rate on your income tax return, but they count the same way toward your Medicare income calculation. Medicare uses your Modified Adjusted Gross Income, which includes both types of dividends.

When does Medicare start using my new income if my dividends change?

Medicare uses your tax return from two years prior. So if your dividend income changes in 2024, Medicare will not see that change until 2026, when they review your 2024 tax return. If the change is significant and causes hardship, you can request an exception.