Modified Adjusted Gross Income (MAGI) determines how much you pay for Medicare premiums and prescription drug coverage

Modified Adjusted Gross Income, or MAGI, is the income figure Medicare uses to calculate your monthly premiums for Part B (doctor visits) and Part D (prescription drugs), and to decide whether you may have access to for extra help paying those costs. It is not the same as the adjusted gross income on your tax return — Medicare adds certain types of income back in to get a higher number.

If your MAGI is higher, you pay higher premiums. If it is lower, you pay the standard amount. This matters because the difference between a lower MAGI and a higher one can mean hundreds of dollars per year in out-of-pocket costs. Understanding what counts toward your MAGI and when Medicare recalculates it can help you plan ahead.

Key Takeaways

  • MAGI includes your adjusted gross income plus tax-exempt interest, half of any self-employment tax you paid, and certain foreign income — not just wages and pensions.
  • If your MAGI exceeds certain thresholds that change each year, you pay an extra charge called an Income-Related Monthly Adjustment Amount (IRMAA) on top of your regular Part B and Part D premiums.
  • Medicare uses your tax return from two years ago to set your current premiums, so a major life change (retirement, marriage, death of a spouse) may not affect your costs until the following year.
  • You can request that Medicare recalculate your MAGI in the year of a significant income drop, and they will use your current-year estimate instead of the two-year-old return.
  • The MAGI thresholds and premium amounts change annually, so your costs may increase even if your income stays the same.

What Income Counts Toward Your MAGI

Your MAGI starts with your adjusted gross income from your federal tax return — wages, self-employment income, pensions, and distributions from retirement accounts. But Medicare then adds back several types of income that the IRS lets you exclude from your taxable income.

The main items added back are: tax-exempt interest (usually from municipal bonds), half of any self-employment tax you paid, foreign earned income and foreign housing exclusions, and certain income from Puerto Rico, Guam, American Samoa, or the U.S. Virgin Islands if you are a bona fide resident. If you received a distribution from a traditional IRA, SEP-IRA, or straightforward IRA and rolled it over to another retirement account within 60 days, that rollover does not count. Social Security benefits do not count toward MAGI for Medicare premium purposes.

The exact calculation can be complex if you have multiple income sources. The Centers for Medicare & Medicaid Services (CMS) publishes a worksheet each year showing the order of steps to follow. Your tax preparer or a Social Security representative can walk you through it if you are unsure.

How MAGI Affects Your Part B and Part D Premiums

If your MAGI stays below the annual threshold set by Medicare, you pay the standard Part B premium (the amount most beneficiaries pay for doctor coverage). If your MAGI exceeds the threshold, you pay the standard premium plus an extra monthly charge called an Income-Related Monthly Adjustment Amount, or IRMAA.

The thresholds and IRMAA amounts change every year. For example, in 2024, the thresholds for single filers started at $97,000 and went up in steps; married couples filing jointly started at $194,000. The extra charge ranged from about $70 to $560 per month depending on how far above the threshold your income was. In 2025, those thresholds and amounts shifted again. You can find the current year's thresholds on the Medicare.gov website or by calling Social Security at 1-800-772-1213.

The same IRMAA structure applies to Part D premiums. If you may have access to for a low-income subsidy that helps pay for prescription drugs, a higher MAGI can reduce or eliminate that subsidy.

Why Medicare Uses Your Tax Return From Two Years Ago

Medicare does not use your current income to set your premiums. Instead, it uses your federal tax return from two years prior. In 2025, for example, Medicare is using your 2023 tax return to set your premiums. This lag exists because the IRS does not release tax data to Medicare until months after the filing important date, and Medicare needs time to process millions of beneficiaries' records.

The two-year lag means that major life changes — retirement, a spouse's death, divorce, or a significant drop in income — do not when ready lower your premiums. You will continue paying based on the old income until the following year, when the newer tax return takes effect. This can feel unfair if your income has dropped sharply, which is why Medicare offers a way to request an adjustment.

Requesting a Recalculation if Your Income Dropped

If you experience a significant life event that substantially reduced your income in the current year, you can ask Social Security to recalculate your MAGI using your current-year estimate instead of waiting for the two-year-old return to cycle through. Life events that may have access to include: retirement, loss of income-producing property, loss of a pension, divorce, death of a spouse, or a substantial reduction in self-employment income or wages.

To request a recalculation, contact Social Security at 1-800-772-1213 or visit your local Social Security office. You will need to explain the life event and provide documentation — a retirement letter from your employer, a divorce decree, a death certificate, or a written estimate of your current-year income. Social Security will review your request and, if approved, send a new premium notice to Medicare. The new premium typically takes effect the month after Social Security approves the change.

Keep in mind that Social Security can only recalculate once per year. If your income situation changes again later in the year, you cannot request another adjustment until the following year.

How to Find Your MAGI and Check Your Premium Amount

Your MAGI is not listed on your Medicare statements or online account. To see it, you need to look at your federal tax return or contact Social Security directly. If you file taxes, your tax preparer can calculate it for you using the CMS worksheet. If you do not file taxes, Social Security can estimate your MAGI based on the income information you provide.

Your actual Part B and Part D premium amounts appear on your Medicare premium notice, which Social Security mails to you each year, usually in November or December for the following year. You can also view your premium amount by logging into your Medicare.gov account or by calling Social Security. If you believe your premium is wrong because your income has changed, that is the time to request a recalculation.

MAGI Thresholds Change Every Year

The income thresholds that trigger IRMAA charges are adjusted annually for inflation. This means that even if your income stays exactly the same, your premium may increase if the threshold drops below your income level. Conversely, if your income grows but the threshold rises faster, you might not trigger a higher IRMAA tier.

CMS publishes the new thresholds and premium amounts each fall on Medicare.gov and in the Medicare Premiums and Costs fact sheet. Social Security also mails a notice to all beneficiaries showing the new premiums for the coming year. If you are close to a threshold, it is worth checking the updated numbers each year to see whether your costs will change.

Frequently Asked Questions

Does Social Security count toward MAGI for Medicare?

No. Social Security benefits are excluded from MAGI for Medicare premium calculations. However, they do count toward other income limits for programs like Medicaid or Supplemental Security Income.

What if I am married and file taxes jointly but my spouse is not on Medicare?

Medicare uses your joint tax return to calculate your MAGI, even if only one of you is enrolled. Your spouse's income counts toward the threshold. If you file separately, each person's MAGI is calculated from their individual return.

Can I lower my MAGI by contributing more to my 401(k) or IRA?

Contributions to a traditional 401(k) or IRA reduce your taxable income, but Medicare adds back IRA distributions, so the timing matters. If you take a distribution and roll it over within 60 days, it does not count. Speak with a tax professional about strategies that fit your situation.

What happens if Social Security denies my recalculation request?

You can appeal the decision. Contact Social Security to ask why it was denied and what additional documentation might help. You can also request a hearing before an administrative law judge if you disagree with the decision.

Do I pay IRMAA if I am still working and have employer health insurance?

Yes. IRMAA is based on income, not on whether you have other coverage. Your employer insurance does not reduce your Medicare premiums or IRMAA charges.