Is non-taxble Social Security included in MAGI?

[scottretired]

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

[AJ]

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-y...

     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.

[scottretired]

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

[NCperson]

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! 

[scottretired]

Thank you

[AJ]

Correct.  The tax-exempt Social Security isn't included in the MAGI calculation for the IRMAA. (In my initial response, I looked at the Medicare rule that was provided in a Medicare publication that failed to address the possibility of the Foreign Earned Income component that also counts.)

[NCperson]

Documentation below from SSA

https://www.ssa.gov/pubs/EN-05-10536.pdf

PDF page 6 - about half way down

[LarryMc]

Could clarify your response? I.e where did you find the information that non-taxable social security benefits are not included in the MAGI calculation for IRMAA surcharge determination? This sounds plausible, but an earlier answer in this forum points to a worksheet for form 8962 which does add in the untaxed social security benefit portion (though this may be for a non-IRMAA purpose).

Thank you

[NCperson]

Documentation below from SSA

https://www.ssa.gov/pubs/EN-05-10536.pdf

PDF page 6 - about half way down - that is the 2nd page  of their pamphlet and copied below 

To determine if you’ll pay higher premiums, Social Security
uses the most recent federal tax return the IRS provides
to us. If you must pay higher premiums, we use a sliding
scale to make the adjustments, based on your modified
adjusted gross income (MAGI). Your MAGI is your total
adjusted gross income and tax-exempt interest income.

and adjusted gross income (AGI) only includes the taxable portion of SS, meaning the non-taxable portion is not part of AGI. 

[LarryMc]

I had read the EN-05-10536.pdf several times, but given the prior answer in this forum and similar ambiguous references found elsewhere, and the fact that I'll be coming close to the IRMAA limit, I was hoping for an unequivocal statement that the non-taxable portion of SS benefits were not included in the MAGI for IRMAA determination purposes. It appears I'm not going to find that, and I do agree that the statement "Your MAGI is your total adjusted gross income and tax-exempt interest income." implies that only the taxable portion already in the AGI is included. I guess I'll go with that. Thanks very much.

[AJ]

     I understand your discomfort.  With so many different types of MAGI, it is hard to make decisions. 

     My experience in this area resulted from appealing to a lower IRMAA due to a life-changing event.  You can find the rules at this link, and the information at this link more clearly defines the rules.     https://www.ssa.gov/forms/ssa-44.pdf

     Please look on page 6 of 8 in the first paragraph of Step 2.  There it clearly states, "Your MAGI is your adjusted gross income as used on line 37 of form 1040 plus your tax-exempt interest income as used on line 8b of IRS form 1040."  The line numbers refer to forms prior to TY2018, but the method appears to be clear.

     Also note Step 3, on page 2 of 8, of ssa-44 for entering the data that defines MAGI for the purpose of IRMAA.  It only uses AGI and Tax-Exempt Interest income.  The terms AGI and Tax-Exempt Interest Income repeat the definitions located near the bottom of Page 6.   And just in case we didn't get the messages, SSA again defines the definitions for Step 3 in the Instruction section on Page 7 of 8. So I think the definitions in SSA-44 logically indicate that the untaxed portion of Social Security is not added into that MAGI.   I'm not aware of any changes to the rules, but please understand that I can't know what I don't know. I share your discomfort becaues an error comes with a loss of money.

[jtomchay]

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-y...

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.

[NCperson]

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?  

[Papoon]

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 .