What income sources are included in MAGI for IRMAA calculations in 2025?
Executive summary
Modified Adjusted Gross Income (MAGI) for 2025 IRMAA is your 2023 federal AGI plus certain tax‑exempt items (notably tax‑exempt interest); Medicare uses the taxable portion of Social Security in AGI and then adds back tax‑exempt interest to produce MAGI for IRMAA determinations (based on your 2023 return) [1] [2] [3]. The Social Security Administration applies that MAGI to the 2025 IRMAA brackets and will notify beneficiaries if a surcharge applies; life‑changing events allow appeals [4] [5] [6].
1. What “MAGI” means for IRMAA: the official arithmetic
For IRMAA, MAGI starts with your Adjusted Gross Income (AGI) from the federal Form 1040 then adds back specific tax‑exempt income—principally tax‑exempt interest such as municipal bond interest—so your Medicare MAGI can exceed your AGI if you have nontaxable interest [2] [3]. Multiple consumer and advisory writeups summarize the CMS/SSA method: use the AGI line from your 1040 and add tax‑exempt interest reported on Form 1040, line 2a, to arrive at MAGI for IRMAA purposes [2] [7].
2. Which income items typically push you into IRMAA
Common retirement income sources that appear in AGI and therefore count toward IRMAA include IRA and 401(k) distributions, taxable portions of Social Security benefits (only the taxable part is in AGI), capital gains, dividends and interest from taxable accounts—all of which are captured in AGI and then used as the starting point for MAGI [7] [8]. Advisors and calculators repeatedly call out that Roth withdrawals do not increase MAGI, while Roth conversions, traditional IRA distributions and realized capital gains do [9] [6].
3. What is added back that people often miss
The principal add‑back that differentiates MAGI from AGI for IRMAA is tax‑exempt interest, for example municipal bond income and certain U.S. savings bond interest used for higher education; these are not included in AGI but are added to compute MAGI for Medicare IRMAA [3] [2]. Several planning guides emphasize that for most beneficiaries MAGI equals AGI because many people don’t have tax‑exempt interest, but for those who do it can be decisive [9].
4. Social Security and MAGI: only the taxable portion counts
Contrary to some public confusion, only the taxable portion of Social Security benefits is reflected in AGI and therefore in MAGI for IRMAA calculations; non‑taxable Social Security is not separately added back for IRMAA [2] [8]. Sources consistently state the SSA uses the taxable Social Security amount within AGI when computing whether IRMAA applies [2].
5. Timing: why 2025 IRMAA uses your 2023 return
IRMAA is set on a two‑year lag: the SSA bases 2025 surcharges on your MAGI from your 2023 tax return because CMS/SSA uses the most recent IRS data available from two years prior [4] [1]. That lag is the practical reason year‑end tax planning matters long before you reach Medicare — actions in 2023 determine 2025 premiums [5].
6. Practical consequences and planning levers
Advisers and wealth‑management pieces identify avoidable triggers: large taxable events (capital gains, large IRA distributions, Roth conversions in certain windows) can create a MAGI spike and a “cliff” IRMAA surcharge even if the excess is temporary; conversely, strategies such as timing income, using Roth assets for tax‑free withdrawals later, or using Qualified Charitable Distributions may reduce MAGI risk [6] [9]. Sources also note appeals are possible after life‑changing events via SSA Form SSA‑44 [6].
7. Limits of available reporting and open questions
Available sources describe AGI plus tax‑exempt interest as the MAGI formula for IRMAA and list common income types that feed AGI [2] [7]. They do not provide an exhaustive IRS code list in this reporting; if you need a line‑by‑line verification for an uncommon income source, “available sources do not mention” every category and you should consult SSA/CMS guidance or a tax professional [2].
Sources cited: CMS/SSA summary reporting and consumer financial coverage: U.S. News (IRMAA basis and thresholds) [1]; advisory explainers on MAGI construction and tax‑exempt interest add‑back [2] [3]; general IRMAA timing and appeals [4] [5] [6]; income examples and taxable Social Security clarification [7] [8].