Do IRA contributions reduce MAGI for IRMAA?

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Summit111
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Do IRA contributions reduce MAGI for IRMAA?

Post by Summit111 » Wed Dec 05, 2018 10:09 am

Do contributions to a traditional IRA reduce Modified Ajusted Gross Income (MAGI) the purposes of Medicare Part B Income-related monthly adjustment amount (IRMAA). Results from searching are not clear.

I will be close to the threshold limits when filing my 2018 taxes, and a contribution to a traditional IRA with keep me under that limit. I receive Medicare and am semi retired with some consulting income. I do not draw Social Security yet.

Thanks,
Summit

cadreamer2015
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Location: North County San Diego

Re: Do IRA contributions reduce MAGI for IRMAA?

Post by cadreamer2015 » Wed Dec 05, 2018 10:40 am

Yes.

You now put IRA contributions on Schedule 1. Line 36 (a total of deductions) on Schedule 1 is deducted from Total Income on the 1040 to calculate AGI on the new 1040 form. This AGI is used to calculate MAGI.
De gustibus non est disputandum

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Summit111
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Re: Do IRA contributions reduce MAGI for IRMAA?

Post by Summit111 » Wed Dec 05, 2018 10:42 am

Thanks...will look into it!

Summit

kaneohe
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Re: Do IRA contributions reduce MAGI for IRMAA?

Post by kaneohe » Wed Dec 05, 2018 11:00 am

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

"How does Social Security determine if I must
pay higher premiums?
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.
"

To understand this I would look at 2017 1040 which is easier to understand.
The new 1040 is a silly rearrangement of the same form but is harder to decipher.
https://www.irs.gov/pub/irs-pdf/f1040.pdf check out lines 32/37

cas
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Re: Do IRA contributions reduce MAGI for IRMAA?

Post by cas » Wed Dec 05, 2018 11:14 am

Summit111 wrote:
Wed Dec 05, 2018 10:09 am
Do contributions to a traditional IRA reduce Modified Ajusted Gross Income (MAGI) the purposes of Medicare Part B Income-related monthly adjustment amount (IRMAA). Results from searching are not clear.
(Bold added by me.)

I've recently been seeing a steady trickle of forum posts involving MAGI for various purposes (IRMAA, Roth IRA contribution eligibility, etc.) that all tend to end up with a comment similar to "Results from searching are not clear."

I don't know if this is the situation in your particular case, but the root of the confusion usually ends up being the fact that there is no single "MAGI": there are different MAGI calculations for different purposes, e.g. IRMAA vs eligibility for Roth IRA contributions vs ACA subsidy thresholds, etc. etc.). So, when researching on the internet, you have to be careful that you are reading about the MAGI calculation that is relevant to your question.

For IRMAA, if you google "MAGI IRMAA site:.gov" and then make sure to click only on results from the social security or medicare websites, you should always see the same answer on how to calculate the IRMAA-style MAGI (Adjusted Gross Income from your IRS 1040 + tax-exempt income). (And, relevant to your particular question, if you qualify to make a deductible contribution to an IRA, that is an "above the line" deduction that is deducted out before the tax form gets to the final AGI number. On other words, yes, it reduces AGI and, therefore, reduces IRMAA-style MAGI.)

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Summit111
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Re: Do IRA contributions reduce MAGI for IRMAA?

Post by Summit111 » Wed Dec 05, 2018 5:35 pm

It seems to me that the IRS and Social Security administration should post clear guidelines regarding this issue. As more of us retire, we should have a clear path froward.

I’ll take the advice given so far and see If a concrete answer exists....

Thanks,
Summit

Spirit Rider
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Re: Do IRA contributions reduce MAGI for IRMAA?

Post by Spirit Rider » Wed Dec 05, 2018 7:46 pm

You already have a concrete answer from @kaneohe's post at 11:00 am quoting from an SSA.gov link.

Your MAGI is your total adjusted gross income and tax-exempt interest income.

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Summit111
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Re: Do IRA contributions reduce MAGI for IRMAA?

Post by Summit111 » Wed Dec 05, 2018 9:38 pm

Spirit Rider,

I reviewed all the suggested sites including kaneohe's, and the SSA.gov info was the most accurate and clear. That will be my path forward.

There appears to be conflicting info on the web regarding this issue and I thank all who provided guidance.

Summit

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