Policy Loans, Medicare IRMAA and the Tax on Social Security
Written and reviewed by Hans Goldstein, licensed insurance producer, NPN 20602398 · CA Insurance License #4273294Last reviewed · Published October 3, 2026
What counts and what does not
How common retirement income sources show up
| Source of retirement cash | In AGI? | Raises provisional income for Social Security tax? | Counts toward IRMAA? |
|---|---|---|---|
| Traditional IRA or 401(k) withdrawal | Yes | Yes | Yes |
| Non-qualified annuity gain | Yes | Yes | Yes |
| Capital gains and dividends | Yes | Yes | Yes |
| Tax-exempt municipal bond interest | No, but added back | Yes (added back) | Yes (added back) |
| Roth IRA qualified withdrawal | No | No | No |
| Life insurance loan or basis withdrawal (non-MEC, in force) | No | No | No |
Provisional income for Social Security includes AGI, tax-exempt interest and half of benefits (IRC 86). IRMAA uses modified AGI, which also adds back tax-exempt interest.
AI voices. Education, not tax or legal advice. Hans is paid a commission if you buy a policy through him. Comment REVIEW on the video for the checklist.
The two thresholds that matter
- Social Security tax: up to 50% of benefits become taxable once provisional income passes $25,000 (single) or $32,000 (married filing jointly), and up to 85% above $34,000 or $44,000. Those thresholds are fixed in the statute and not indexed (IRC 86).
- Medicare IRMAA: the standard Part B premium for 2026 is $202.90 a month (Medicare.gov); higher incomes pay more, based on modified AGI from an earlier tax year.
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Where this helps: a Roth conversion year
Say a 66-year-old couple is converting $80,000 a year from a traditional IRA to a Roth before RMDs start. The conversion is income, so they want to keep other income low. Living expenses taken from a policy loan or basis withdrawal do not stack on top of the conversion. The same money taken from the IRA would. That is one practical reason Hans puts permanent life insurance after the 401(k) match and Roth in his order, not instead of them (IUL vs Roth).
The conditions, stated once
Policy loans and withdrawals up to your basis are generally not taxed if the policy is not a modified endowment contract (IRC §7702A) and stays in force; a lapse or surrender with a loan outstanding can create taxable income. Loans also accrue interest and reduce the death benefit, and a policy needs years of funding before it has meaningful cash value. This works for people who built the cash value decades earlier, not for someone starting at 64.
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Hans Goldstein · 213-414-2808 · NPN 20602398, independent licensed insurance producer
Frequently asked questions
Sources
- 26 U.S.C. §86 (taxation of Social Security benefits), Cornell LII
- Medicare.gov: Medicare costs (2026 Part B premium $202.90)
- 26 U.S.C. §72 (annuities and certain proceeds), Cornell LII
- 26 U.S.C. §7702A (modified endowment contracts), Cornell LII
Hans Goldstein, CA Insurance License #4273294 · NPN 20602398 · Goldstein & Co. LLC dba Goldstein Insurance Services, CA License #6016830
Contact: hans@hansgoldstein.com · 213-414-2808
General education, not tax or legal advice. Tax treatment depends on your facts and on current law, which can change. Talk to your CPA or estate attorney. Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Guarantees apply only to the contractual terms of the policy. Caps, participation rates, loan rates, charges and dividends are not guaranteed and can change. Hans is paid a commission by the insurer if you buy a policy through him. For life insurance, ask and he will tell you what he earns on your specific policy. Product and company names are trademarks of their owners. Goldstein Insurance Services is an independent agency, not affiliated with or endorsed by any insurer named here. Life insurance requires underwriting; not everyone qualifies. This page describes products in general terms; read the policy and the insurer's disclosures before you buy.