Medicare IRMAA and tax exempt interest.

Yes, you have to add back the Foreign Earned Income Exclusion for this MAGI. See the link in post #2.

If MAGI is 1040 line 11 plus line 2 then the FEIE is not included because it is not included in line 11, AGI.
Please see the referenced link: MAGI for Medicare premiums (IRMAA tiers).

In particular, the second bullet point under Determined without regard to....

Also, as Cathy63 noted:
For example, the SSA's Medicare Premiums: Rules For Higher-Income Beneficiaries[3] mentions the tax-exempt interest but neglects to mention the necessary addition of the foreign items or income from US Savings bonds used to pay higher education tuition and fees.
 
Thanks Dash. So Treasury income and CD income do not apply?
Yes they absolutely do count.

The IRMAA is based on your AGI + muni interest (there may be a few other very obscure items). Any regular interest income is included in your AGI.
 
Thanks Michael.. I have learned a lot here.. My confusion is the term tax exempt. Why are the categories of muni, treasury and cd called tax exempt yet they must be added as income for federal tax and can increase your IRMAA.
Treasury and CD interest are not called tax exempt. You may be confusing with state income tax which has nothing to do with IRMAA.
 
Audreyh is correct.
Income taxability and IRMAA are different.
INCOME Tax includes all the normal stuff, but EXCLUDES "muni" most interest. From that calculation you pay income tax.

For purposes of MEDICARE premium adjustments, SS starts with your AGI (WHICH ALREADY INCLUDES US Treasury Interest) for the ^income tax calculation^ per above then ADDS additional income that escaped Income Tax. SS uses a broader definition of income. SO for SS and IRMAA calculations, Muni Interest and FEIE are ADDED to AGI as they were NOT included in the AGI calculation. This calculation serves to INCREASE your income for Medicate Premium calculation purposes.

That IRMAA calculation does NOT affect the income tax calculation and ONLY exists under SS rules.

Alan / retired (thank God!) CPA


AS AN ADENDUM:
Treasury interest is FEDERALLY taxable but not necessarily STATE <California EXCLUDES Federal interest.
MUNI interest is generally NOT taxable at Federal (1040) level. State may or not: California EXCLUDES "California" muni interest, but INCLUDES muni interest from other States. So, my Indiana bonds would be EXCLUDED for IRS but INDLUDED for California, whereas my Sacramento Municipal Utility District muni bonds are excluded from BOTH IRS **AND** California tax calculations.
 
Last edited:
Thanks Dash. So Treasury income and CD income do not apply?
They absolutely are federally taxable and included in AGI. CDs are taxable for both federal and state. Treasuries are taxed federally but not by your state.
 
MAGI must be considered in context. It is "defined" differently for different uses. I can't vouch for accuracy, but have seen some that say IRS has 10 different contexts.

Also, the data used is the "most recent" from the IRS when IRMAA is calculated. So, for example, the IRMAA applicable for 2025 premiums will be determined in 4q2024. If you filed your income tax for 2023 income before April 2024 deadline & it was successfully processed, that will be the most recent. However, if you got an extension & IRS hasn't processed it, then it could be using 2022 income.

You should get notification before year end that will give the numbers.

Hope that helps
 
You should get notification before year end that will give the numbers.

You can look at either your medicare.gov account or your Social Security account to see the premium amount.
 
Treasury and CD income is always taxed as ordinary federal income, not tax exempt for federal that I know.
Correct. BTW, we are in the second and final year of IRMAA hell, and it is hell. I had some success in the markets a couple of years back and neglected to harvest enough losses to make a dent. I made sure two tax years back it would not happen again, but the DW and I are both turning 71 this year so with RMDs down the road we could be staring at it again. It does suck when you get hit by it because it is two years in arrears meaning your situation could have changed drastically from when you had the higher income, but they are now taking out thousands of $ per year from both your SS check totals. And for people wondering about tax exempt interest? This past January they clipped us both for an extra few hundred $ each because they said they disallowed the tax-exempt interest for IRMAA purposes from the affected year's return. They need to index soon or there will be millions of retirees facing this same hell that we have for two years running.
 
Correct. BTW, we are in the second and final year of IRMAA hell, and it is hell. I had some success in the markets a couple of years back and neglected to harvest enough losses to make a dent. I made sure two tax years back it would not happen again, but the DW and I are both turning 71 this year so with RMDs down the road we could be staring at it again. It does suck when you get hit by it because it is two years in arrears meaning your situation could have changed drastically from when you had the higher income, but they are now taking out thousands of $ per year from both your SS check totals. And for people wondering about tax exempt interest? This past January they clipped us both for an extra few hundred $ each because they said they disallowed the tax-exempt interest for IRMAA purposes from the affected year's return. They need to index soon or there will be millions of retirees facing this same hell that we have for two years running.
Yep! There are 10 different MAGI to be aware of. Not all would necessary apply to everyone, but a good chance at least 1 will. At least they started inflation adjusting the IRMAA thresholds a couple of year ago.
 
Last edited:
There are too many tax related rules for retirees, that it is overwhelming to say the least. Ex. SSI, IRMAA, Income in retirement, RMD’s, Tax Brackets, Etc.
How do we all manage our finances in retirement?
Do you seek professional help?
I know this is supposed to be a good problem to have, but?
 
DH just applied for Medicare (ok, I applied for him as he initially thought that he did not have to do anything, then did not read the instructions properly for a naturalized citizen, initially could not find the required documents which had to be brought into a SS office, and stressed himself out).

In any event, he just received a letter in mail detailing how the IRMAA premium was calculated.
 
Last edited:
There are too many tax related rules for retirees, that it is overwhelming to say the least. Ex. SSI, IRMAA, Income in retirement, RMD’s, Tax Brackets, Etc.
How do we all manage our finances in retirement?
Do you seek professional help?
I know this is supposed to be a good problem to have, but?

- We have used a CPA for years. I like a second set of eyes, but make schedules with attached documents for the CPA, do an estimate before I drop off the papers, go over the drafts line by line, and then have a telephone conference with the CPA to discuss any issues/ questions.

- We don't qualify for SSI (Supplemental Security Income) - and have chosen to delay SS to age 70 to allow room for Roth conversions, and provide a larger stream of income / longevity insurance for the surviving spouse.

-IRMMA is calculated for you. Gumby has also listed IRMAA and tax brackets for you in his wonderful list, under Some important trigger income levels for 2024. Tax brackets are listed by the IRS.

- I pay myself a salary once a month into a main operating account, some of which is diverted a dedicated "tax account." I remove lumpy expenses from my brokerages on an as needed basis. (The bulk of my expenses are tax related).

- Regarding professional help, just my long time CPA (who is a comptroller for a billion dollar company but keeps a few long time clients on the side) although he does not advise me how to handle my money.
 
There are too many tax related rules for retirees, that it is overwhelming to say the least. Ex. SSI, IRMAA, Income in retirement, RMD’s, Tax Brackets, Etc.
How do we all manage our finances in retirement?
Do you seek professional help?
I know this is supposed to be a good problem to have, but?
a good number of them are out of my control so I spend zero or < 0 time thinking about them. I also don't worry if I get it wrong. We have sufficient income and assets to get us into the ground without compromising our happiness and that is all I care about.
 
There are too many tax related rules for retirees, that it is overwhelming to say the least. Ex. SSI, IRMAA, Income in retirement, RMD’s, Tax Brackets, Etc.
How do we all manage our finances in retirement?
Do you seek professional help?
I know this is supposed to be a good problem to have, but?
What, specifically, are you wanting to manage? Many do-it-yourself tools are available for those who choose that path.
 
There are too many tax related rules for retirees, that it is overwhelming to say the least. Ex. SSI, IRMAA, Income in retirement, RMD’s, Tax Brackets, Etc.
How do we all manage our finances in retirement?
Do you seek professional help?
I know this is supposed to be a good problem to have, but?
I do it all myself, only because I enjoy keeping up with the rules. But I agree our tax code is WAY more complex than it should be, and we're one of the few developed countries that doesn't provide completed tax returns to taxpayers for their approval. Our legislators have made sure there are countless loopholes thanks to special interests, and tax return jobs created unnecessarily.
 
Correct. BTW, we are in the second and final year of IRMAA hell, and it is hell. I had some success in the markets a couple of years back and neglected to harvest enough losses to make a dent. I made sure two tax years back it would not happen again, but the DW and I are both turning 71 this year so with RMDs down the road we could be staring at it again. It does suck when you get hit by it because it is two years in arrears meaning your situation could have changed drastically from when you had the higher income, but they are now taking out thousands of $ per year from both your SS check totals. And for people wondering about tax exempt interest? This past January they clipped us both for an extra few hundred $ each because they said they disallowed the tax-exempt interest for IRMAA purposes from the affected year's return. They need to index soon or there will be millions of retirees facing this same hell that we have for two years running.
There are a number of events that allow you to appeal your IRMAA calculation if your income substantially changed vs the 2 year period. Have oyu looked into that?
Of course, nobody likes to pay extra premiums, but the IRMAA rules are in place to ask for a little extra from people who have very substantial incomes. Opinions vary, of course, but personally I'm ok with that. And yes, I'm due to pay substantial IRMAA premiums myself as well, starting in a couple of months.
 
Correct. BTW, we are in the second and final year of IRMAA hell, and it is hell. I had some success in the markets a couple of years back and neglected to harvest enough losses to make a dent. I made sure two tax years back it would not happen again, but the DW and I are both turning 71 this year so with RMDs down the road we could be staring at it again. It does suck when you get hit by it because it is two years in arrears meaning your situation could have changed drastically from when you had the higher income, but they are now taking out thousands of $ per year from both your SS check totals. And for people wondering about tax exempt interest? This past January they clipped us both for an extra few hundred $ each because they said they disallowed the tax-exempt interest for IRMAA purposes from the affected year's return. They need to index soon or there will be millions of retirees facing this same hell that we have for two years running.
The IRMAA tiers actually ARE indexed to inflation nowadays.
Check The Finance Buff's site for the latest and best projections...
 
Yep! There are 10 different MAGI to be aware of. Not all would necessary apply to everyone, but a good chance at least 1 will. At least they started inflation adjusting the IRMAA thresholds a couple of year ago.
We hit the RMD wall in two years. I was looking at the current amount of what our withdrawal would be at that age and I think I can keep it under the scenario that caused us to be in it the last two years, but only time will tell. I'll move some more funds out this year and pay taxes at our current level trying to lessen the shock in two years. Good luck to everyone facing this issue.
 
We hit the RMD wall in two years. I was looking at the current amount of what our withdrawal would be at that age and I think I can keep it under the scenario that caused us to be in it the last two years, but only time will tell. I'll move some more funds out this year and pay taxes at our current level trying to lessen the shock in two years. Good luck to everyone facing this issue.
Depending on how exuberant your overall finances are when you start RMDs, you can use Qualified Charitable Distributions to contain your IRMAA MAGI...
 
Depending on how exuberant your overall finances are when you start RMDs, you can use Qualified Charitable Distributions to contain your IRMAA MAGI...
Yep. Since we do a goodly amount to charity per year we'll be looking at that alternative as well.
 
There are too many tax related rules for retirees, that it is overwhelming to say the least. Ex. SSI, IRMAA, Income in retirement, RMD’s, Tax Brackets, Etc.
How do we all manage our finances in retirement?
Do you seek professional help?
I know this is supposed to be a good problem to have, but?
I do it all myself on an Excel spreadsheet. I research the law of each item and build that into my calculation.
 
I am another one who does it alone, but I would add that I also deliberately attempt to keep my finances (and hence my taxes) as simple as possible. I am not interested enough in gaining that last basis point of return or avoiding that last dollar of taxes to make things more complicated.
 

Latest posts

Back
Top Bottom