IRMAA, tIRA, limits & rules questions

[Philliefan33]

I'm working on our 2019 taxes. As of now our AGI is a little bit over the second IRMAA tier. Actually, I haven't been able to find what the IRMAA income levels will be for 2019 (affecting what DH will pay for Medicare part B in 2021), so I am using the 2018 number of $218,000.

We both had fun summer gigs that resulted in W-2 income. Not much, but enough that we can make tIRA contributions to bring our MAGI down below the second tier IRMAA threshold, but only if we are allowed to take the IRA deduction. (edited to clarify: we only had $7 of non-taxable interest, so MAGI for Medicare is essentially the same as AGI for these calculations)

The ability to take the IRA deduction hinges (for us) on whether or not we have a retirement plan at work. That means our current work, not the careers we retired from, correct? The only W-2 income we received in 2019 was from employment that does not offer us a retirement plan. As I understand it, that means I can make a deductible IRA contribution no matter what our total income is.

Does anyone understand it differently?

(*This approach is just kicking the can down the road for us, since once some other income streams and RMDs kick in we will end up paying more IRMAA anyway. I'll have to make a spreadsheet to figure out how to bunch some Roth conversions to lessen the impact, but for this year I want to avoid just barely being in the next IRMAA tier)

 

[Sunset]

I always thought the IRA deduction ability depended solely on income. ??

 

[kaneohe]

OP, my impression same as yours

https://www.irs.gov/retirement-plans/ira-deduction-limits

Traditional IRAs
Retirement plan at work: Your deduction may be limited if you (or your spouse, if you are married) are covered by a retirement plan at work and your income exceeds certain levels.
No retirement plan at work: Your deduction is allowed in full if you (and your spouse, if you are married) aren’t covered by a retirement plan at work.

 

[pb4uski]

+1 Since they are not covered by a retirement plan at work then they can contribute and deduct and reduce MAGI.

That said, one thing to consider is that my understanding is that IRMAA will be adjusted for inflation beginning in 2020, so the current 2020 $218k floor for the second tier would will likely be a tad higher than $218k in 2021.

 

[Philliefan33]

+1 Since they are not covered by a retirement plan at work then they can contribute and deduct and reduce MAGI.

That said, one thing to consider is that my understanding is that IRMAA will be adjusted for inflation beginning in 2020, so the current 2020 $218k floor for the second tier would will likely be a tad higher than $218k in 2021.

Probably, but what is a tad? Rather than having to guess, I’d rather be safely under the 2018 number.

Thanks for the responses. Getting this right will save us hundreds of dollars (for now).

 

[audreyh1]

Probably, but what is a tad? Rather than having to guess, I’d rather be safely under the 2018 number.

Thanks for the responses. Getting this right will save us hundreds of dollars (for now).

Well, you can at least use the 2020 number, because that will be lower than the 2021 threshold that applies to you in 2021.

Actually $218K is the 2020 tier 2 number for MFJ IRMAA. You must have mistyped the year above.

 

[pb4uski]

Probably, but what is a tad? Rather than having to guess, I’d rather be safely under the 2018 number.

Thanks for the responses. Getting this right will save us hundreds of dollars (for now).

Well, you can at least use the 2020 number, because that will be lower than the 2021 threshold that applies to you in 2021.

Yes, the limits that your 2019 tax return income will be compared to will not be less than the 2020 level of $218k (unless we had negative inflation but I'm not sure if they are allowed to adjust for that). And since you pay the second tier rate if you are $1 over or $50k over, then I would be cautious and just use the 2020 level.

 

[mapletree]

I'm working on our 2019 taxes. As of now our AGI is a little bit over the second IRMAA tier. Actually, I haven't been able to find what the IRMAA income levels will be for 2019 (affecting what DH will pay for Medicare part B in 2021), so I am using the 2018 number of $218,000.

Please also check on this: MAGI (based on tax return two years prior, or three years if two years prior is unavailable)


https://secure.ssa.gov/poms.nsf/lnx/0601101020

 

[Philliefan33]

Please also check on this: MAGI (based on tax return two years prior, or three years if two years prior is unavailable)


https://secure.ssa.gov/poms.nsf/lnx/0601101020

I (think I) understand how IRMAA works. DH is paying more for part B this year because of our income in 2018.

What I am trying to manipulate is our MAGI for tax year 2019 to avoid paying even more for part B in 2021. Without a deductible IRA contribution, we are over the Tier 2 MAGI. I can get us below the Tier 2 threshold, but not below the first tier. I understand it’s not a bad problem to have..