$3K Capital Loss and IRMAA

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lexie2000
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$3K Capital Loss and IRMAA

Post by lexie2000 »

DH will be 65 in 2022, so 2020 is our first look-back year for Medicare premiums. We will have a $3000 long term capital loss on our 1040 in 2020 and I wondered if this should be added to our AGI when calculating MAGI for IRMAA. We are doing Roth conversions and I don't want to go over the cliff. Sorry if this has been covered before, but I've never seen it mentioned.
deltaneutral83
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Re: $3K Capital Loss and IRMAA

Post by deltaneutral83 »

Correct, capital gains(losses/max $3k per year) are incorporated into AGI.
Topic Author
lexie2000
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Re: $3K Capital Loss and IRMAA

Post by lexie2000 »

I know that the capital loss will be included in AGI, what I need to know is whether or not it changes MAGI as related to IRMAA and going over the cliff.
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HueyLD
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Re: $3K Capital Loss and IRMAA

Post by HueyLD »

deltaneutral83
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Re: $3K Capital Loss and IRMAA

Post by deltaneutral83 »

MAGI calculation from Turbo Tax:

To calculate your modified adjusted gross income, take your AGI and add back certain deductions. Many of these deductions are rare, so it's possible your AGI and MAGI can be identical. According to the IRS, your MAGI is your AGI with the addition of the following deductions, if applicable:

Student loan interest
One-half of self-employment tax
Qualified tuition expenses
Tuition and fees deduction
Passive loss or passive income
IRA contributions
Taxable social security payments
The exclusion for income from U.S. savings bonds
Foreign earned income exclusion
Foreign housing exclusion or deduction
The exclusion under 137 for adoption expenses
Rental losses
Any overall loss from a publicly traded partnership

So, not sure about that part about passive loss or passive income. But if you add back a loss, I would think that you would include it??
jj
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Re: $3K Capital Loss and IRMAA

Post by jj »

It is confusing, I know, especially when the IRMAA calculation is a cliff. Going over that cliff could make a difference of $840 per person extra (2020 figures) for your Medicare Part B and D costs, it will likely be more by 2022. Going over by just a few dollars would be especially annoying.

The IRMAA MAGI is different from the ACA MAGI. This is irritating as I have seen the two confused in online articles.

In the link provided by HueyLD from the SSA, it shows only tax-exempt income (municipal bonds) adding back in. Other sources show rarer forms of income being added back in, such as foreign earned income, income from US protectorates, and income from US savings bonds excluded when used for further education.

https://www.fiphysician.com/magi-calcul ... x-credits/

Personally, I am planning on following the guidelines in HueyLD's link from the SSA.
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HueyLD
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Re: $3K Capital Loss and IRMAA

Post by HueyLD »

The definition of MAGI for IRMAA is defined in Social Security Act Section 1839, not in Internal Revenue Code.

According to https://www.ssa.gov/OP_Home/ssact/title18/1839.htm#:

“(4) Modified adjusted gross income.—

(A) In general.—For purposes of this subsection, the term “modified adjusted gross income” means adjusted gross income (as defined in section 62 of the Internal Revenue Code of 1986)—

(i) determined without regard to sections 135, 911, 931, and 933 of such Code; and

(ii) increased by the amount of interest received or accrued during the taxable year which is exempt from tax under such Code. In the case of an individual filing a joint return, any reference in this subsection to the modified adjusted gross income of such individual shall be to such return’s modified adjusted gross income.”

For items other than tax exempt interest, it is very rare for Medicare beneficiaries to have them. Rare but not impossible.
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dodecahedron
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Re: $3K Capital Loss and IRMAA

Post by dodecahedron »

deltaneutral83 wrote: Wed Apr 22, 2020 9:20 am MAGI calculation from Turbo Tax:

To calculate your modified adjusted gross income, take your AGI and add back certain deductions. Many of these deductions are rare, so it's possible your AGI and MAGI can be identical. According to the IRS, your MAGI is your AGI with the addition of the following deductions, if applicable:

Student loan interest
One-half of self-employment tax
Qualified tuition expenses
Tuition and fees deduction
Passive loss or passive income
IRA contributions
Taxable social security payments
The exclusion for income from U.S. savings bonds
Foreign earned income exclusion
Foreign housing exclusion or deduction
The exclusion under 137 for adoption expenses
Rental losses
Any overall loss from a publicly traded partnership

So, not sure about that part about passive loss or passive income. But if you add back a loss, I would think that you would include it??
There are *many* different definitions of MAGI for different purposes (e.g., for ACA premium credits, for eligibility to contribute to Roth IRA, etc.) The MAGI definition deltaneutral83 cites above may well be appropriate for some other purpose but it is NOT the applicable MAGI definition for IRMAA. Note that deltaneutral83 cites ¨TurboTax¨ as their authority, but TurboTax is a tax return preparation program. Calculating MAGI for IRMAA purposes is not a priority for TurboTax since it has no impact the return TurboTax is preparing.

See HueyLD´s subsequent post for the authoritative definition of MAGI for IRMAA purposes.
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Eagle33
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Re: $3K Capital Loss and IRMAA

Post by Eagle33 »

When it comes to definition of the different MAGI, I start with the wiki MAGI page, then to this forum if the governmental reference link(s) do not give a clear enough definition.

MAGI for Medicare premiums
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lexie2000
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Re: $3K Capital Loss and IRMAA

Post by lexie2000 »

Eagle33 wrote: Wed Apr 22, 2020 9:30 pm When it comes to definition of the different MAGI, I start with the wiki MAGI page, then to this forum if the governmental reference link(s) do not give a clear enough definition.

MAGI for Medicare premiums
This was the most helpful to me. Thank you so much.
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