A Delaware Statutory Trust does not pay anyone's Medicare premium. But DST income and the Medicare IRMAA surcharge are joined by a single number: the Modified Adjusted Gross Income reported on a retiree's federal return. Rental income on Schedule E, passthrough income on a K-1, depreciation recapture at disposition, and gain recognized at a 721 UPREIT exit all land in adjusted gross income — and Medicare reads that return two years after the fact.
Why the two-year lookback hides the connection
Medicare's Income-Related Monthly Adjustment Amount does not look at this year's income. It looks at the tax return filed two years earlier. A retiree who disposes of a DST interest, exits through a 721 UPREIT transaction, or recognizes boot in a related 1031 exchange in 2026 will not see the Medicare consequence until the 2028 premium notice arrives. By then the proceeds are long since deployed, and the surcharge reads as if it has nothing to do with the DST.
The mechanism is simple once isolated. For IRMAA purposes, MAGI is adjusted gross income plus tax-exempt interest. DST rental income reported on Schedule E, or passthrough income on a K-1, adds to AGI in the year it is recognized. So does gain recognized when a DST property is sold, when boot is triggered in a related exchange, or when a 721 UPREIT exit converts trust interests into REIT operating partnership units. None of those events spread evenly across a hold period. They tend to land in one tax year — and that one year is what the lookback captures. (If the return from two years prior is not yet available to the Social Security Administration, it uses the prior year's return until the newer data arrives.)
The limitation is worth stating up front: an IRMAA determination also depends on filing status, whether a life-changing event applies, and which return the Social Security Administration has on file. A DST income event is one input into a bracket system, not a guaranteed surcharge by itself.
The Top1031 directory tracks DST offerings and sponsors from SEC filings rather than sponsor marketing, which is the record the structural side of this question pulls from — how an offering is capitalized, whether it is tagged all-cash, leveraged, or zero-coupon, and what its documents disclose about exit mechanics.
What a MAGI review starts with
- The last two full-year federal returns (Form 1040) with Schedule E or Schedule K-1 detail for each DST holding
- The current IRMAA threshold table for the relevant premium year, from Medicare.gov or the Social Security Administration
- A record of any DST disposition, 721 UPREIT exit, or boot recognized in a related 1031 exchange during the lookback year
- The MAGI definition itself: adjusted gross income plus tax-exempt interest
- A CPA or tax preparer who can confirm the actual MAGI figure, since the brackets are cliffs rather than slopes
Working the numbers, step by step
1. Pull two years of Schedule E or K-1 detail, not one
A single year of tax data hides the lookback entirely. Line up the return that will determine next year's premium alongside the return two years before it, and note how DST income gets reported for each holding. The mechanics differ depending on whether the trust passes income through as rental income on Schedule E or as a K-1 line item.
2. Rebuild MAGI, not taxable income
Taxable income already reflects the standard or itemized deduction. MAGI for IRMAA starts from AGI and adds back tax-exempt interest. A retiree comparing taxable income to an IRMAA table is comparing the wrong figure against the right one. Rebuild MAGI directly from the 1040 and confirm it with a preparer before assuming a bracket.
3. Line up MAGI against the current table, then shift it two years
For 2026, the standard Part B premium is $202.90 a month, and the first surcharge tier begins above $109,000 of MAGI for single filers and $218,000 for joint filers — based on 2024 tax returns. Brackets and surcharge amounts are adjusted annually, so the current-year table on Medicare.gov is the authoritative source for any given premium year. What does not change is the offset: 2026 income sets the 2028 premium.
4. Separate the depreciation years from the disposition year
Depreciation on a DST's underlying property shelters rental income during the hold, which is one reason a DST can show muted MAGI impact for years. That shelter reverses at disposition. Depreciation recapture taxed at sale adds back to income in a single tax year — the year the lookback will read. A retiree who has never crossed a surcharge threshold can cross more than one in the year a DST property sells.
5. Treat a 721 UPREIT exit or full disposition as a lookback event
A 721 UPREIT exit converts trust interests into operating partnership units, and depending on how the exit is structured, gain may be recognized in the year of conversion. The year to model is two years forward from that event, not the current one.
6. Check whether boot landed in the same tax year
Boot recognized in a related 1031 exchange is taxable in the year received. If boot and a DST disposition fall in the same tax year, the MAGI effects stack rather than offset — which is how a retiree clears two brackets instead of one.
7. Understand what Form SSA-44 actually covers
Form SSA-44 lets a Medicare beneficiary report a life-changing event — work stoppage or reduction, marriage, divorce or annulment, death of a spouse, loss of pension income, an employer settlement payment, or loss of income-producing property outside the beneficiary's control, such as disaster, theft, or fraud — that reduced income after the lookback year closed. A voluntary DST sale or a 721 exit is not one of those events. The form addresses defined circumstances, not general income volatility.
Where the lookback catches people out
- The notice arrives two years after the sale, with no obvious connection. That gap is the design of the lookback, not an error. Trace the premium year back two years to find the triggering return.
- Depreciation made the DST look income-neutral, then the sale year did not. Depreciation defers tax; it does not erase it. Recapture is the deferred piece surfacing at once.
- A K-1 loss appeared, yet MAGI still rose. Other income, a spouse's earnings, or a separate disposition in the same year can outweigh one holding's loss.
- An appeal was filed after retirement, but the gain still counted. Work stoppage is a qualifying event; the capital gain itself is not.
- A 721 UPREIT exit was assumed to be tax-free. Whether gain is recognized at conversion depends on the specific exit terms disclosed in the offering documents, not on a blanket assumption about UPREIT structures.
Working from the return, not an estimate
The dollar thresholds published on Medicare.gov are the only authoritative figures for a given premium year, and the only reliable MAGI is the one built from the filed return. A CPA who has already seen both years of Schedule E or K-1 detail can identify a lookback spike before the notice arrives rather than after. Top1031 publishes filing-based data on DST offerings and sponsors and does not provide tax, legal, or investment advice.
Compare DST offerings by structure
See how income timing and capitalization differ across the current cohort in the Top1031 directory of DST offerings.
FAQ
Does DST rental income count toward the MAGI behind IRMAA?
Yes. Once DST income reaches AGI through Schedule E or a K-1, IRMAA does not distinguish it from directly owned rental income. MAGI for this purpose is AGI plus tax-exempt interest.
How far back does Medicare look?
Two years. A 2026 return determines the 2028 Part B and Part D adjustment, with the prior year's return used if the newer one is not yet on file.
Can a 721 UPREIT exit raise Medicare premiums?
It can, where the exit structure recognizes gain in the year of conversion. That gain raises MAGI for that year, which can move a retiree into a higher bracket two years later.
Does a DST sale qualify for an SSA-44 adjustment?
No. The qualifying events are specific — work stoppage or reduction, marriage, divorce, death of a spouse, loss of pension, an employer settlement, or loss of income-producing property outside the beneficiary's control. A sale or exchange gain is not among them.
The event that shows up twice
The surprise is rarely a DST's routine distribution. It is the one-time gain at a 721 UPREIT exit or a full disposition — a figure that typically dwarfs a normal year's rental income, then reappears exactly once, two years later, on a premium notice that never mentions the trust by name.