What Income Counts Toward IRMAA MAGI?
A retiree holds $300,000 in municipal bonds because the interest is tax-free. It is. The interest is also added straight back into the income number Medicare uses to price your premiums. That is the sentence that sends people to this page: tax-free does not mean IRMAA-free.
What income counts toward IRMAA MAGI: the two-line formula
For IRMAA purposes, modified adjusted gross income is your AGI from Form 1040 line 11, plus tax-exempt interest from line 2a. That is the whole formula. Everything people argue about online is just classification: does this particular dollar reach AGI, and if not, is it the one add-back?
A useful rule for any income source: ask what amount reaches AGI, then check whether IRMAA adds anything back. If $50,000 hits your bank account but only $18,000 of it is taxable, the IRMAA question is about the $18,000. Cash received and income recognized are different numbers, and only the second one matters here.
What counts, item by item
| Income source | Counts toward IRMAA MAGI? | What matters |
|---|---|---|
| Wages and salary | Yes | Taxable wages |
| Pension payments | Yes | Taxable portion |
| Traditional IRA, 401(k), TSP distributions | Yes | Taxable portion |
| Required minimum distributions | Yes | Taxable portion; QCDs excluded |
| Roth conversions | Yes | Converted amount in the conversion year |
| Social Security benefits | Partially | Taxable portion only |
| Capital gains | Yes | Net gain, not sale proceeds |
| Dividends and taxable interest | Yes | Full taxable amounts |
| Business and rental income | Yes | Net taxable result |
| Tax-exempt municipal bond interest | Yes | The IRMAA add-back |
| Qualified Roth IRA distributions | No | Excluded from gross income |
| Qualified charitable distributions | No | Excluded from income |
The pattern is consistent. Anything that reaches AGI counts at the amount that reaches it, plus the one deliberate exception for tax-exempt interest. Basis, nontaxable portions, and qualified exclusions do not count, because they never become income.
The $12,000 that pushed a premium up
Take a single filer in 2026. AGI of $100,000, plus $12,000 in tax-exempt municipal bond interest. IRMAA MAGI is $112,000. The 2026 threshold for single filers is $109,000, so the muni interest alone pushes this retiree into surcharge territory. Without those bonds, at $100,000 of MAGI, there is no surcharge at all.
This is where people reach for the standard deduction. It does not help. The standard deduction reduces taxable income, which is further down the return, not AGI. Nothing you do below line 11 changes the IRMAA number. The levers that work are the ones that change what reaches AGI in the first place, which is the subject of our guide to lowering MAGI.
Three mistakes worth not making
The first is treating a Roth conversion as free. It is excellent long-term planning and it lands in the conversion year's MAGI at full weight. Size conversions against the threshold, or do them in the years before the lookback window matters.
The second is counting sale proceeds instead of gains. A $200,000 stock sale with $140,000 of basis adds $60,000 to MAGI, not $200,000. Basis is your friend in this calculation, and it is the number people forget to subtract.
The third is assuming only wages count. For most retirees facing IRMAA, wages are the smallest line on the return. The surcharge usually comes from the combination nobody planned: RMDs plus a conversion plus a capital gain in the same year, each innocent on its own.
Run your own numbers with the calculator up top. Enter each income source the way the table above classifies it, and it will show which side of the 2026 thresholds you land on, single or joint. How the thresholds work per person versus per couple matters for the input.
Frequently Asked Questions
Does Roth conversion income count toward IRMAA MAGI?
Yes. The taxable amount you convert is included in gross income for the conversion year, so it raises the MAGI that sets your Medicare premiums two years later. Conversions are tax-smart for the future but expensive for that year's IRMAA math.
Does tax-exempt municipal bond interest count toward IRMAA?
Yes. Tax-exempt interest is the one explicit add-back in the IRMAA formula: MAGI equals AGI plus tax-exempt interest from Form 1040 line 2a. Municipal bond interest that is free of income tax still counts for Medicare premiums.
Do capital gains count toward IRMAA MAGI?
The net recognized gain counts, not the sale proceeds. If you sell $200,000 of stock with a $140,000 basis, the $60,000 gain is what reaches AGI and IRMAA MAGI.
Does Social Security count toward IRMAA MAGI?
Only the taxable portion. Form 1040 reports total benefits separately from the taxable amount, and only the taxable amount increases AGI. The nontaxable portion is not an IRMAA add-back.
Do qualified charitable distributions count toward IRMAA MAGI?
No. A qualifying QCD sent directly from an IRA to a charity is excluded from income, so it does not raise AGI or IRMAA MAGI. It can even satisfy an RMD without the income showing up.
Where Does Your MAGI Land?
Enter each income source and see your IRMAA MAGI against the 2026 thresholds, with the two-year lookback built in.
Calculate My IRMAA