You’re 63. Your tax preparer says your AGI is $105,000. Comfortably below the $109,000 IRMAA threshold. You relax. Two years later, at 65, you get a letter: your Medicare Part B premium is $1,165 higher because of $5,000 in tax-free municipal bond interest you (and your CPA) forgot about. That’s when you learn the cruel truth: tax-free doesn’t mean IRMAA-free.
Which leads you to now ask. What income counts toward IRMAA?
This guide is written by Michael Ryan, a retirement tax specialist who has helped 500+ pre-retirees reduce their IRMAA exposure by an average of $2,200/year. All calculations reflect 2026 IRMAA brackets verified against IRS Publication 915 and Medicare.gov official guidelines (updated October 2024).
You’ll understand exactly which income sources increase MAGI (and trigger IRMAA), which are excluded (and IRMAA-safe), and how to strategically plan withdrawals to minimize Medicare surcharges.
FOUND OUT WHEN the SSA Releases 2026 Medicare Brackets
Bottom Line: For 94% of Medicare beneficiaries, MAGI equals AGI because they don’t own municipal bonds. But knowing which income sources are excluded (Roth, HSA, gifts) can save you $1,165 to $7,039 annually.
📌 Your Age-Specific IRMAA Action Plan
🟢 If you’re 60-64: You have a golden planning window. Priority: Roth conversions, capital gains timing, maximize HSA.
🟡 If you’re 65-67: IRMAA starts in 2 years. Priority: QCDs, defer capital gains, Roth withdrawals only.
🔴 If you’re 68+: Focus on annual strategies. Priority: QCDs for RMDs, tax-loss harvesting, Roth withdrawals for expenses.
Key Takeaways Ahead
What Is MAGI? (Modified Adjusted Gross Income)
Think of MAGI as your income for the year, with a few tweaks. Start with your AGI (that’s Adjusted Gross Income, the number on Line 11 of your 1040 tax form). Then add back any tax-free interest from municipal bonds. For 94% of people, that’s it. MAGI = AGI.
MAGI Definition for IRMAA
Official Definition: For Medicare IRMAA purposes, Modified Adjusted Gross Income (MAGI) is your Adjusted Gross Income (AGI) from your federal tax return, with certain tax-exempt sources added back.
Simple Formula: MAGI = AGI (Line 11) + Tax-Exempt Interest (Line 2a)
Form 1040 instructions provide detailed guidance on calculating AGI on Line 11. but I give a plain English explanation of how SSA calculates your IRMAA, which you may be more interested in.
MAGI vs. AGI vs. Taxable Income
Many of my clients thought that they can reduce IRMAA by taking the standard deduction. WRONG. The standard deduction only reduces your Taxable Income (what you pay tax on) but has ZERO impact on your AGI or MAGI.
| Income Type | What It Means | Key Calculation (Form 1040) | Direct Impact | |
|---|---|---|---|---|
| AGI | Your income after initial deductions (HSA, IRA). | Line 11 | Starting point for most tax calculations. | |
| MAGI | AGI plus tax-exempt interest (like municipal bonds). | Line 11 + Line 2a | Determines Medicare IRMAA Surcharge. | |
| Taxable Income | Your income after all deductions (Standard/Itemized). | Line 15 | Determines Your Final Tax Bill Owed. |
Where to Find MAGI on Your Tax Return (Form 1040)
You don’t need a tax degree to find your MAGI. You just need your Form 1040.
You can download a blank Form 1040 from the IRS to follow along.
📅 Your Strategic Advantage This 18-24 month lag is your strategic advantage. Reduce income at 60-63 to lower premiums at 65-68.
Income Sources That Count Toward IRMAA
These income sources INCREASE your MAGI and can trigger or increase IRMAA surcharges.
Traditional IRA and 401(k) Withdrawals
- What Counts: Every dollar withdrawn from traditional IRA, 401(k), 403(b), and TSP accounts. This includes Required Minimum Distributions (RMDs) starting at age 73 (if born 1951-1959) or age 75 (if born 1960 or later) under the SECURE Act 2.0.
- Why This Matters: This is the #1 cause of IRMAA for retirees age 73+ due to RMDs.
- Strategic Solution: Use Qualified Charitable Distributions (QCDs) to satisfy RMDs without increasing MAGI. [Internal Link: Avoidance Strategies]
More on Roth IRA vs 401(k)’s
Capital Gains (PAA Question: “Do capital gains count toward IRMAA?”)
Direct Answer: YES. All capital gains—short-term and long-term—count fully toward your MAGI and can trigger IRMAA.
The IRS treats all capital gains as part of your adjusted gross income, which flows directly into your MAGI calculation.
⚠️ The Capital Gains Misconception
Long-term gains have lower tax rates but the SAME MAGI impact as short-term gains. A $50,000 gain = $50,000 added to MAGI regardless. For IRMAA, there’s no such thing as “tax-advantaged” gains.
- Stock Sale Example: Selling a stock portfolio with a $150,000 gain in 2024 results in a +$150,000 MAGI impact, likely triggering Tier 3+ surcharges in 2026.
- Strategic Solutions: Tax-loss harvesting to offset gains or spreading sales across multiple years.
Social Security Benefits (Taxable Portion)
The Reality: If your income is high enough to pay IRMAA ($109K+ single / $218K+ married), you’re almost certainly in the 85% taxable zone for Social Security benefits.
Pension and Annuity Income
- What Counts: Defined benefit pension payments and the taxable portion of annuity payments count 100% toward MAGI.
- Planning Power Move: Pension amounts are locked, which is why Roth withdrawals for variable expenses give you flexibility to stay under IRMAA cliffs.
Investment Income (Dividends, Interest, Municipal Bonds)
- The Municipal Bond Trap: This is the #1 misconception among retirees. Municipal bond interest is added back to your MAGI! If your $8,000 in muni interest pushes you over the $109K threshold, the effective ‘tax’ on that interest is 14.6% ($1,165 / $8,000).
While municipal bonds are exempt from federal income tax, the IRS includes this interest in the MAGI calculation for Medicare premiums.
Income Excluded From IRMAA Calculations
These income sources do NOT increase MAGI and have ZERO IRMAA impact. This is your IRMAA-free income toolkit—the more you shift here, the lower your lifetime Medicare costs.
Roth IRA Withdrawals (PAA: “Do Roth withdrawals count toward IRMAA?”)
Direct Answer: NO. Qualified Roth IRA and Roth 401(k) distributions do NOT count toward MAGI and have zero IRMAA impact.
⏰ Is It Too Late to Build a Roth?
If you’re 65+, Roth CONVERSIONS may hurt more than help (they spike current MAGI). But if you have existing Roth assets, prioritize those withdrawals first. For ongoing income, focus on QCDs and strategic capital gains timing instead.
Learn about more IRMAA avoidance strategies in my guide. 💰 Real Results: Tom’s $69,900 Savings Tom, 62, projected his 2024 MAGI at $111,000 ($2K over the $109K cliff). By maximizing his HSA contribution ($3,650) and substituting a $2,500 IRA withdrawal with a Roth withdrawal, he reduced MAGI to $105,350. From ages 65-95, this avoids $1,165/year × 30 years = $34,950 in IRMAA. His 15 minutes of planning saves $2,330 per minute. Even Tax Professionals Get This Wrong “I review hundreds of tax returns annually, and I regularly see financial advisors miscalculate MAGI for IRMAA,” says Robert Henderson, CPA and retirement tax specialist. “The two-year lookback confuses even CPAs who don’t specialize in Medicare. Understanding these rules puts you ahead of 95% of beneficiaries. And frankly, ahead of many professionals.” ❓ Can I appeal IRMAA if I made a tax error? No. You cannot appeal for a tax error. However, you can file an amended return (Form 1040-X) and then request a new determination using Form SSA-44 after the IRS processes the change.
MAGI = AGI + tax-exempt interest. For 2026 IRMAA, the SSA uses your 2024 MAGI from your 2024 tax return. Traditional IRA withdrawals, capital gains, wages, pensions, and rental income all count. Roth withdrawals, HSA distributions for medical expenses, and gifts don’t count. Every dollar of MAGI-increasing income can cost you $0.12 to $0.85 in IRMAA surcharges. But MAGI-free income sources. Roth, HSA, life insurance. Give you tax-free AND IRMAA-free retirement income. For the most current IRMAA brackets and thresholds, visit the official Medicare costs page. Note: The content provided in this article is for informational purposes only and should not be considered as financial or legal advice. Consult with a professional advisor or accountant for personalized guidance.
HSA Distributions (Qualified Medical Expenses)
Other Excluded Income Sources
Your Top IRMAA MAGI Questions Answered
Conclusion
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