[Edited] This exclusion applies only to distributions from a qualified retirement retirement plan subject to Section 402 of the tax code. Payments for Medicare Part B or Part D can be treated as the payments for such insurance whether or not they are paid out of pocket or paid with withholding from your Social Security payments. Medicare Part B payment can be claimed as an itemized medical deduction if you itemize deductions on Schedule A, but you must exclude from that deduction the amount used for the exclusion.
