Medicare MAGI Explained
What Counts as Income for Medicare IRMAA?
Medicare’s income calculation begins with adjusted gross income and then adds tax-exempt interest. The taxable part of retirement, investment and employment income can therefore affect future Part B and Part D premiums.
Quick answer
For IRMAA, MAGI Is Generally AGI Plus Tax-Exempt Interest
Social Security generally starts with the adjusted gross income reported on Form 1040 and adds the tax-exempt interest reported on Form 1040. For the current SSA-44 instructions, those are line 11 and line 2a. Social Security usually receives the information directly from the IRS.
This means a source of money affects IRMAA when it changes the tax-return amounts used in that calculation. The amount deposited into a bank account is not necessarily the amount that counts.
Medicare’s MAGI Is Not a Separate Tax Return
People often expect Medicare to total every deposit, asset or account balance. It does not. IRMAA generally follows the income already reflected on the federal return, with tax-exempt interest added to adjusted gross income.
Start With Adjusted Gross Income
AGI combines taxable income from the return after certain adjustments. It is calculated before the standard or itemized deduction.
Add Tax-Exempt Interest
Municipal-bond and other tax-exempt interest reported on the return can count for IRMAA even though it may be exempt from regular federal income tax.
Apply the Lookback
Social Security generally uses this MAGI from two years before the premium year. For 2026 premiums, it generally uses 2024 information.
Income categories
Income That May Affect Medicare IRMAA
The following table describes common categories. It is not a substitute for preparing the return, and special tax rules can change the portion included in AGI.
| Income or Transaction | How It May Affect IRMAA MAGI | Important Distinction |
|---|---|---|
| Wages and self-employment income | Taxable earnings generally contribute to AGI. | Business revenue is not the same as taxable net business income. |
| Traditional IRA and retirement-plan distributions | The taxable portion generally contributes to AGI. | A distribution may include taxable and nontaxable amounts. |
| Roth conversions | The taxable portion of a conversion generally increases AGI. | Moving money is not automatically tax-free merely because it stays in retirement accounts. |
| Qualified Roth distributions | A properly qualified tax-free distribution generally does not increase AGI. | A nonqualified distribution can have a taxable portion. |
| Pensions and annuities | The taxable portion generally contributes to AGI. | After-tax basis may make part of a payment nontaxable. |
| Social Security benefits | The taxable portion included on the return contributes to AGI. | The gross benefit and taxable benefit may be different. |
| Interest and dividends | Taxable interest and dividends generally contribute to AGI. | Tax-exempt interest is added separately for IRMAA. |
| Capital gains | Net taxable capital gains reported on the return generally affect AGI. | Sale proceeds are not the same as taxable gain. |
| Rental, royalty and other taxable income | Net taxable amounts may contribute to AGI. | Deductions, basis and passive-activity rules may change the amount. |
Money That Does Not Automatically Count as IRMAA Income
Receiving money does not by itself establish that the full amount belongs in AGI. Common examples that may be wholly or partly outside AGI include:
- Qualified tax-free Roth IRA or designated Roth account distributions
- The nontaxable return-of-basis portion of a retirement distribution or sale
- Loan proceeds, because borrowed money is generally not income
- A gift or inheritance itself, although later earnings or a taxable gain from inherited property may count
- Qualified tax-free HSA distributions used for eligible medical expenses
Why Tax-Exempt Interest Still Matters
Tax-exempt interest is the major addition that distinguishes Medicare’s IRMAA MAGI from ordinary AGI. A municipal bond may produce interest that is exempt from regular federal income tax while still increasing the MAGI Social Security uses for IRMAA.
This does not make the interest taxable. It means Congress chose an income measure for Medicare premiums that adds that amount back to AGI.
Large Transactions Can Affect One Premium Year
IRMAA uses annual tax information. A one-time taxable event—a Roth conversion, property gain, large traditional IRA withdrawal or business sale—can move MAGI into a higher tier for the premium year tied to that return.
That does not necessarily create a permanent adjustment. Later premiums can move down when Social Security receives a later return showing lower MAGI. Our guide to IRA withdrawals, Roth conversions and Medicare premiums explains this timing in more detail.
IRMAA brackets work like steps, not a gradual percentage
Moving just above a threshold can place the beneficiary into the next full monthly IRMAA level. The income-tax effect and the Medicare-premium effect are separate calculations, so both should be considered before a major transaction.
Can You Ask Social Security to Use Different Income?
A qualifying life-changing event that reduces income may allow Social Security to use more recent information. Recognized events include retirement or reduced work, marriage, divorce, death of a spouse and certain other events listed by Social Security.
A large voluntary withdrawal, Roth conversion or investment sale is not automatically a recognized life-changing event. If the IRS information was wrong or you filed an amended return, contact Social Security about the appropriate correction process. Read our guide to lowering IRMAA with Form SSA-44.
Frequently asked questions
IRMAA Income Questions
Do IRA withdrawals count as income for IRMAA?
The taxable portion of a traditional IRA distribution generally contributes to AGI and therefore to IRMAA MAGI. Nontaxable basis can change how much is included.
Do qualified Roth IRA withdrawals count for IRMAA?
A qualified tax-free Roth IRA distribution generally does not increase AGI. A conversion into a Roth account is different: the taxable conversion amount generally increases AGI in the conversion year.
Do capital gains count for Medicare IRMAA?
Net taxable capital gains reported on the federal return generally affect AGI. The full sale price is not necessarily the gain; basis and applicable exclusions or losses can change the amount reported.
Does tax-exempt municipal-bond interest count?
Yes, tax-exempt interest reported on Form 1040 is generally added to AGI for the Medicare IRMAA calculation.
Does Medicare count assets or only income?
IRMAA is an income-based premium adjustment, not an asset test. Owning an asset does not itself create IRMAA, although income or taxable gain produced by the asset may affect MAGI.
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We do not provide tax or investment advice. Have a qualified tax professional calculate MAGI and transaction consequences.
This article provides general Medicare information and does not provide tax, investment, accounting or legal advice. Social Security and the IRS make official income and IRMAA determinations.