Short answer: For IRMAA planning, start with federal AGI and add tax-exempt interest. If part of your Social Security is taxable, it is already inside AGI. Do not add the nontaxable portion again for the basic IRMAA estimate.
Why the answer feels confusing
People run into trouble because the phrase modified adjusted gross income is used in different programs. Marketplace health insurance, Social Security benefit taxation, Roth IRA rules, and Medicare IRMAA do not always use the same add-backs.
For Medicare Part B and Part D IRMAA, the practical planning formula is usually:
IRMAA Medicare MAGI = AGI + tax-exempt interest
Education sponsor placement for Social Security, retirement income, and Medicare premium planning resources.
Where Social Security shows up
Your tax return may include a taxable portion of Social Security benefits. That taxable portion flows into AGI, so it can affect IRMAA because AGI is part of the IRMAA calculation.
The nontaxable portion of Social Security is different. For a plain-English IRMAA estimate, you generally do not add the nontaxable portion on top of AGI unless an official form or advisor is asking for a different program-specific calculation.
Example
Suppose a retiree has $98,000 of AGI, including the taxable part of Social Security, plus $4,000 of municipal bond interest. The IRMAA planning number is about $102,000. If their nontaxable Social Security benefit was not part of AGI, it is not added again in this basic IRMAA formula.
What to include before you test a Roth conversion
- Federal AGI from the tax year Medicare is using.
- Tax-exempt interest such as municipal bond interest.
- Any planned Roth conversion, IRA withdrawal, RMD, capital gain, or home-sale gain you are testing.
- Only the taxable portion of Social Security if it is already part of AGI.
Common mistakes
- Adding all gross Social Security benefits on top of AGI.
- Using ACA Marketplace MAGI rules for Medicare IRMAA.
- Forgetting tax-exempt interest because it does not feel like taxable income.
- Looking at this year's premium notice without remembering the two-year lookback.
Next step
Use the calculator's Medicare MAGI helper to build a starting number, then test planned income events before making a year-end decision. For a deeper walkthrough, read the Medicare MAGI guide and the IRMAA two-year lookback guide.