For Medicare’s income-related monthly adjustment amount, income means your adjusted gross income from line 11 of your Form 1040 plus any tax-exempt interest from line 2a. The Social Security Administration calls that sum your modified adjusted gross income, and it’s the only figure that determines whether you owe an IRMAA surcharge on top of your Part B and Part D premiums.1Social Security Administration. POMS HI 01101.010 – Modified Adjusted Gross Income (MAGI) No worksheets, no separate calculation. If you can find those two lines on your tax return, you know what counts as income for IRMAA.
For 2026, you owe no surcharge if that MAGI stays at or below $109,000 as an individual or $218,000 on a joint return.2Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles Cross those lines and premiums climb in tiers. The rest of this article is about what actually goes into that MAGI number.
Income That Counts
Because MAGI starts with your full AGI, nearly every income source that lands on your Form 1040 feeds into IRMAA:
- Wages, salaries, and tips reported on your W-2.
- Self-employment income (net earnings after business deductions, reported on Schedule SE).3Internal Revenue Service. About Schedule SE (Form 1040), Self-Employment Tax
- Taxable interest and ordinary or qualified dividends from savings accounts, CDs, corporate bonds, stocks, and mutual funds.
- Capital gains, both short-term and long-term, from selling stocks, bonds, real estate, or other investments.
- Traditional IRA and 401(k) distributions, which are treated as ordinary income.
- The taxable portion of pension and annuity payments.
- Taxable Social Security benefits (up to 85% of what you receive, depending on your total income).
- Net rental income (Schedule E) and business income (Schedule C).
- Alimony received under divorce agreements finalized before 2019.
The common thread is simple: if it shows up on line 11 of your Form 1040, it counts. Standard and itemized deductions come later on the return and have no effect on your IRMAA income.
One statutory quirk affects expats. Federal law disregards certain foreign income exclusions when calculating MAGI, so income you excluded under the foreign earned income exclusion still counts for IRMAA.4Office of the Law Revision Counsel. 42 USC 1395r – Amount of Premiums for Individuals Enrolled Under This Part For most domestic filers, MAGI and AGI differ only by the tax-exempt interest add-back covered next.
Tax-Exempt Interest: The Add-Back That Catches People
The one thing beyond AGI that counts is tax-exempt interest, primarily from municipal bonds. It isn’t subject to federal income tax, but the Social Security Administration adds it back when measuring your ability to pay a higher premium.5Social Security Administration. Premiums: Rules for Higher-Income Beneficiaries You report it on line 2a of Form 1040, and the SSA uses that exact figure.6Internal Revenue Service. Instructions for Schedule B (Form 1040) (2025)
This matters most for retirees who hold large municipal bond portfolios specifically to reduce taxes. A portfolio generating $50,000 in tax-exempt interest won’t affect your federal tax bill, but every dollar pushes your MAGI higher for IRMAA. No deduction offsets it.
Income That Does Not Count
If money you received in a given year never hits AGI (and isn’t tax-exempt interest), it doesn’t affect IRMAA. Knowing what’s excluded matters as much as knowing what’s included, because these are the levers you can pull without raising your Medicare premium.
- Qualified Roth IRA distributions. Once you’ve had the Roth for at least five years and you’re over 59½, withdrawals don’t appear in AGI. Pull $100,000 from a qualified Roth account and your MAGI doesn’t change by a cent.
- Qualified charitable distributions. If you’re 70½ or older, you can send up to $108,000 per year (indexed for inflation) directly from a traditional IRA to a qualifying charity. A QCD satisfies your required minimum distribution without hitting your taxable income.
- Gifts and inheritances. Cash or property you receive isn’t taxable income and doesn’t appear on Form 1040.
- Loan proceeds. Borrowing creates a repayment obligation, not income. Reverse mortgage payments, personal loans, and home equity lines of credit don’t count.
- Life insurance death benefits paid to a beneficiary, which generally aren’t included in gross income.
The Roth exclusion is the mirror image of a trap in the next section. Qualified Roth distributions are invisible to IRMAA. Roth conversions are fully visible. That single distinction costs people thousands of dollars a year when they don’t plan for it.
One-Time Events That Push MAGI Over a Threshold
Most people hit with an IRMAA surcharge for the first time aren’t high earners in any traditional sense. They’re retirees who had a single-year income spike that crossed a bracket line. Three scenarios cause this more often than anything else.
Selling a Home
You can exclude up to $250,000 in capital gains from a home sale, or $500,000 for married couples filing jointly, under the primary residence exclusion. Anything above the exclusion is a capital gain in your AGI. A single filer whose profit exceeds the exclusion by $150,000 sees that full amount hit the return, and that one-year spike can land them in a higher IRMAA bracket. The surcharge only applies for the year the gain appears, but because of the two-year look-back, you won’t feel the premium increase until two years later.
Roth Conversions
Converting a traditional IRA or 401(k) to a Roth is a taxable event. The entire converted amount is included in AGI for the year of conversion. A $200,000 conversion on top of normal retirement income can easily push MAGI above $500,000 and trigger the top IRMAA tier. The long-term tax savings may still make the conversion worthwhile, but you need to factor one to two years of higher Medicare premiums into the math. Splitting a conversion across multiple years is one of the most effective ways to keep each year’s MAGI under a bracket line.
Required Minimum Distributions and Inherited IRAs
Required minimum distributions from traditional IRAs and 401(k) plans start no later than April 1 following the year you turn 73. These withdrawals are fully taxable and can be substantial if you’ve accumulated significant tax-deferred savings. Inherited IRAs add another layer. Under current rules, most non-spouse beneficiaries must empty an inherited IRA within 10 years, and many face annual RMD requirements during that window. Those distributions are taxable income in the beneficiary’s own AGI, even if the beneficiary is decades from Medicare age.
When Your Income Actually Hits Your Premium
The SSA doesn’t use current-year income to set your premium. It uses tax data from two years earlier, so your 2026 premium is based on the MAGI you reported on your 2024 return.7Medicare.gov. 2026 Medicare Costs A decision you make today won’t reach your Medicare premium for two years. That delay matters when you’re thinking about which income sources to draw from, and it’s why a Roth conversion, a home sale, or a large RMD in a given year needs to be evaluated with the surcharge two years down the road already in view.