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Level 2
December 18, 2018
Question

Is non-taxble Social Security included in MAGI?

  • December 18, 2018
  • 3 replies
  • 5 views

I can find no definitive documentation as to whether non-taxable Social Security benefits are included in the Modified Adjusted Gross Income calculation?

 

Does anyone know?  Does anyone know where there is definitive documentation that defines the complete list of MAGI inclusions?

 

Thanks

    3 replies

    Level 6
    December 19, 2018

    There is no single uniform value for MAGI.  The "Modification" rules for the MAGI depend on the specific credit or other purpose. Since you are receiving Social Security, I will make the assumption that your question might refer to the MAGI for the Income-Related Monthly Adjustment Amount (IRMAA), which affects the surcharge for Medicare B premiums.  That MAGI is calculated by adding the AGI and the tax-free interest income. (See Line 8b of the old Form 1040, or Line 2a of the new draft 1040.)  If  you have a different purpose for a MAGI, then please state the purpose where the MAGI needs to be calculated in order to determine the correct MAGI rule.

         Here is a link for some of the common MAGI rules other than for the IRMAA: https://turbotax.intuit.com/tax-tips/irs-tax-return/what-is-the-difference-between-agi-and-magi-on-your-taxes/L7kHckNS3

         Some Medicaid programs and other health-related programs can have additional rules, and some of those programs might add untaxed Social Security.  It all depends on the program. MAGI is a confusing topic.

    Level 2
    December 20, 2018

    Thanks so much for your response.

    Yes, I am trying to figure out the MAGI that effects my medicare payment & surcharge.

    Based on your response and references are you saying that tax exempt SS is not part of the MAGI calculation for the IRMAA?

     

    Your reference to:

    Line 8b of form 1040 refers only to tax exempt interest (nothing about tax exempt SS)

    And the link to the TT article references "Taxable SS payments"

     

    My confusion continues because:

    Medicare customer service told me they use MAGI as defined on form 8962 line 2A.

    I believe my form 8962 line 2A includes tax exempt SS

     

     

    So I am still looking for some kind of official documentation that specifically references "non-taxable SS" as it relates to IRMAA

     

     

    Level 15
    December 20, 2018

    when you state 'tax exempt SS', what are you referring to?  are you referencing the 15% that is not taxable (up to 85% is taxable depending on total income).  

     

    https://www.irs.gov/pub/irs-pdf/i8962.pdf

     

    look at the IRS instructions for form 8962 at their website and on the top of page 6 (on the right) is a table to calculate MAGI.  if you look at line 4 "Form 1040 filers' and work through that instruction, what it requires you to do is remove SS taxable income and replace it with gross SS income.  

     

    Hopefully, that  should be the 'official' documentation you are seeking! 

     

    Level 2
    December 16, 2020

    Yes- This is confusing.  It looks like the two agencies have different definitions for MAGI for different purposes.

    Even TurboTax  lists "non-taxable Social Security" to be included in MAGI 

    https://turbotax.intuit.com/tax-tips/irs-tax-return/what-is-the-difference-between-agi-and-magi-on-your-taxes/L7kHckNS3

    For Social Security IRMAA purposes, I believe this can be misleading- (just my opinion).

    I believe for SS IRMAA  purposes, my 15% non-taxed amount is NOT to be added back in (See SSA doc reference below). 

    But I am not going to risk it - I will add that 15% back in as a safety margin when calculating how much Roth conversions I can do.

    Of course standard disclaimer applies- rely on a tax professional.

     

    FYI- Copied  from the SS Handbook at their site: 

    https://www.ssa.gov/OP_Home/handbook/handbook.25/handbook-2501.html

    What is Modified Adjusted Gross Income (MAGI)?

    Modified Adjusted Gross Income is the sum of:

    • The beneficiary's adjusted gross income (AGI) (last line of page 1 of the IRS Form 1040 (U.S. Individual Income Tax Return)), plus

    • Tax-exempt interest income (line 8b of IRS Form 1040)

    2501.1How Is MAGI Used?

    MAGI is used to determine if an Income-Related Monthly Adjustment Amount (IRMAA) applies. It is provided by IRS and is generally information that is two years prior (but not more than 3 years prior) to the year for which the premium is being determined. We will use the appropriate sliding scale table (�2503) to determine the IRMAA.

     

     

     

    Level 15
    December 16, 2020

    the TT reference is NOT incorrect. 

     

    it keeps stating that MAGI is used by the IRS to calculate taxes. 

     

    it NEVER states that it is used by Social Security Administration to calculate IMMR.  

     

    IMMR is not a tax enforced by the IRS; it's additional medical premium 'enforced' by the Social Security Administration.  The IRS doesn't calculate IMMR, only Social Security Administration does.

     

    You are able to document the Social Security reference from their website on how THEY calculate MAGI and IMMR, so why do you not trust it?  

    Level 2
    August 23, 2021

    I guess as more of us age into this situation this question continues to be relevant. 

     

    The most useful "official" reference I could find -- one that clearly shows the different MAGI calculations for different uses -- is the Congressional Research Service's Dec. 2018 publication The Use of Modified Adjusted Gross Income (MAGI) in Federal Health Programs.  It has a very handy Table 1 that lists 5 different federal uses of MAGI and what goes into each calculation.

     

    With respect to the original question: when determining which bracket you fall into when determining IRMAA adjustments to premiums for Medicare Part B and Part D, untaxed social security income is NOT included in MAGI .