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keeperumiami, Sr. Tax Consultant
Category: US Tax
Satisfied Customers: 10505
Experience:  Senior US Tax Consultant;40 Years Practicing CPA; Personal Financial Specialist;Now Retired Sole Practitioner
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Return Due tomorrow! Don't be rude, I procrastinate. Done

This answer was rated:

Return Due tomorrow! Don't be rude, I procrastinate.
Done the math, details, etc. Have filled out many forms. And seem to have many options.
Problem & Question:
Situation: last year I got hit with excess Modified AGI (MAGI as the pros call it) triggering additional Medicare B fees (taxes) through Social Security deductions. Looking to avoid it this year.
Question: Does the "one time gains" issue -- which seems to drive the Medicare penalty (at least in my case) -- include BOTH line 13 and line 14, in aggregate, (meaning gain on 13, loss on 14, or vice versa, and combine the two for Medicare/tax purposes) in addition to non-taxed Social Security (line 20a) (which for me isn't an issue.) Or does only one line count, and which one?

Since your MAGI is determined by taking your AGI and “adding back” certain deductions, it would be your net capital gain that enters into the computation as that is what is included in your AGI. (Limited of course to the $3,000. net capital loss which is the maximum net capital that would be includible in your AGI if your capital losses exceed your capital gains).

These are items which can be subtracted from your AGI, but must be included in the calculation of your MAGI:

• ½ of self-employment tax (self-employed individuals are required to pay “payroll” taxes that an employer would otherwise take; these extra taxes can be deducted from AGI, but are included in MAGI)
• Student loan interest
• Tuition and fees deduction
• Qualified tuition expenses
• Passive income or loss (from Schedule E)
• Rental losses
• IRA contributions and taxable Social Security payments
• Exclusion for income from U.S. savings bonds
• Exclusion for adoption expenses (under 137)

Most of the above deductions are rare, so don’t be surprised if your AGI and your MAGI are the same.


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