Two Medicare late enrollment penalties are described the same way in almost every summary: sign up late, pay more for life. They are built on different units. The Part D drug penalty counts single months and multiplies them by a premium figure that the Centers for Medicare & Medicaid Services resets every year. The Part B medical penalty counts only completed twelve-month periods and multiplies them by a much larger premium. For 2026 the two base figures are $38.99 and $202.90. What follows is what each formula does with the same gap, and why one of them costs a different amount every January while the gap behind it does not change. What Starts the Part D Count The condition is not lateness in general. The Medicare drug coverage cost page states: “You may owe a late enrollment penalty if at any time after your Initial Enrollment Period is over, there’s a period of 63 or more days in a row when you don’t have Medicare drug coverage or other creditable prescriptio...
For the 2026 tax year the IRS raised the annual limit on contributions to a traditional or Roth IRA to $7,500, and set the deduction phase-out range for a single filer covered by a workplace plan at $81,000 to $91,000. Both figures come from IRS Notice 2025-67, announced in the IRS news release on 2026 retirement plan limits. Between them sit two numbers no tax form prints. The first is the income figure actually compared against the range, which is not the adjusted gross income at the bottom of the return. The second is the reduced deduction, which IRS Publication 590-A does not produce as a straight proportion: it rounds the answer up, and it refuses to let the answer fall below $200 while any of the range remains.
Coverage at Work Decides Whether the Income Test Runs at All
The phase-out is conditional, and the condition is not income. IRS Publication 590-A, in the edition for use in preparing 2025 returns, splits the question across two tables, one headed “Effect of Modified AGI on Deduction if You Are Covered by a Retirement Plan at Work” and one for filers who are not. The second is where the income limits stop mattering. The publication states: “If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more of your traditional IRAs of up to the lesser of:” the contribution limit or compensation for the year. Income does not enter that sentence.
The 2026 announcement reads the same way: “For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $81,000 and $91,000, up from between $79,000 and $89,000 for 2025.” The qualifier arrives before the dollar figures do. A single filer with no plan at work faces no income test at all; the ceiling is $7,500, or $8,600 from age 50, or 100% of compensation if that is less.
The Number Tested Is Modified AGI, and Five Lines Go Back Into It
Once coverage exists, the figure compared against the range is modified AGI, built on Worksheet 1-1 of Publication 590-A. It starts from adjusted gross income figured without the IRA deduction, then adds five lines back:
- “Enter any student loan interest deduction from Schedule 1 (Form 1040), line 21”
- “Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45”
- “Enter any foreign housing deduction from Form 2555, line 50”
- “Enter any excludable savings bond interest from Form 8815, line 14”
- “Enter any excluded employer-provided adoption benefits from Form 8839, line 30”
The final line reads: “Add lines 1 through 6. This is your modified AGI for traditional IRA purposes”. Each add-back moves a filer up the range, the opposite of the direction those items move the tax bill. A single filer who deducted $2,500 of student loan interest on $80,000 of adjusted gross income has modified AGI of $82,500 for this test, inside the 2026 range rather than below it.
Two consequences follow. Excluded income is not absent income here, so the foreign earned income exclusion does not lower the figure the phase-out sees. And the IRA deduction is removed before the test, so it cannot shrink the income used to size itself.
The 2026 Ranges, and the Multiplier They Imply
The same release sets three more ranges on the deduction side. For a couple it says: “For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $129,000 and $149,000, up from between $126,000 and $146,000 for 2025.” Where only the other spouse is covered the range runs from $242,000 to $252,000, and for a covered filer on a separate return it remains $0 to $10,000, a range the release notes is not subject to an annual cost-of-living adjustment.
Three of those ranges are $10,000 wide and one is $20,000 wide. Publication 590-A turns that width into a percentage. Line 3 of Worksheet 1-2 reads: “Subtract line 2 from line 1. If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying surviving spouse and you are covered by an employer plan), stop here. You can take a full IRA deduction for contributions of up to $7,000 ($8,000 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse’s) compensation, whichever is less”. Line 4 then multiplies the remaining gap. In the 2025 edition the choices are: “Married filing jointly or qualifying surviving spouse and you are covered by an employer plan, multiply line 3 by 35% (0.35) (by 40% (0.40) if you are age 50 or older).” and “All others, multiply line 3 by 70% (0.70) (by 80% (0.80) if you are age 50 or older).”
Those percentages are the year’s contribution limit divided by the width of the range: for 2025, $7,000 and $8,000 over $20,000 give 35% and 40%, and over $10,000 they give 70% and 80%. The 2026 limit is $7,500, with a catch-up of $1,100 for filers who reach age 50 during the year, for a total of $8,600. The same construction gives 37.5% and 43% for a covered joint contributor, and 75% and 86% for everyone else. The publication carrying those four percentages does not exist yet; the current edition prints the older set.
The Reduction Rounds Up, Then Stops at $200
The note attached to line 4 of Worksheet 1-2 is the part that turns a proportion into something else. It reads: “If the result isn’t a multiple of $10, round it to the next highest multiple of $10. (For example, $611.40 is rounded to $620.) However, if the result is less than $200, enter $200.”
Three cases show what the two clauses do. A single filer of 52 covered at work with 2026 modified AGI of $84,300 is $6,700 below the top of the range; at 86% that is $5,762, not a multiple of $10, so the deductible amount is $5,770. A couple filing jointly, the contributing spouse covered and under 50, with modified AGI of $141,200 sits $7,800 below $149,000; at 37.5% that is $2,925, rounded up to $2,930. A single filer under 50 with modified AGI of $90,800 is $200 below the top; at 75% that is $150, which the second clause lifts to $200.
Across a whole range, the round-up makes the deduction a staircase, not a slope. One $10 notch costs $13.33 of modified AGI for a single filer under 50, since $10 divided by 0.75 is $13.33; it costs $11.63 at age 50 or older, $26.67 for a covered joint contributor under 50, and $23.26 for one at 50 or older. The limit divided by $10 gives 750 notches at $7,500 and 860 at $8,600, but the $200 floor collapses the 19 multiples between $10 and $190, leaving 731 and 841 distinct deductible amounts. Within one notch, two filers whose modified AGI differs by a few dollars deduct the same amount.
The $200 clause then flattens the top of the range into a shelf. For a single filer under 50 the multiplied result falls below $200 once the gap to $91,000 is under $266.67, so 266 whole-dollar incomes, $90,734 through $90,999, all yield $200. Across the last $400 of the range that leaves ten notches and one shelf. For a covered joint contributor the shelf is $533.33 wide, from $148,467 through $148,999, and both end at the top of the range, where no deduction remains.
The Roth Ranges and the Five-Step Reduction
On the Roth side there is no deduction to lose, so the income test governs eligibility itself. The IRS news release sets the 2026 ranges this way: “The income phase-out range for taxpayers making contributions to a Roth IRA is increased to between $153,000 and $168,000 for singles and heads of household, up from between $150,000 and $165,000 for 2025.” For couples filing jointly the release puts the 2026 range at $242,000 to $252,000, up from $236,000 to $246,000 for 2025.
The IRS defines modified AGI separately for Roth purposes, subtracting conversion and rollover income the traditional figure keeps. The reduction then runs in five steps. After subtracting the bottom of the applicable range from that figure, step three is to “Divide the result in (2) by $15,000 ($10,000 if filing a joint return, qualifying surviving spouse, or married filing a separate return and you lived with your spouse at any time during the year).” Step four multiplies the limit by that fraction, and step five subtracts the product from the limit, using “the maximum contribution limit (before reduction by this adjustment and before reduction for any contributions to traditional IRAs)” as the starting figure.
The divisors are the widths of the ranges, so the same arithmetic can be read per dollar. For a filer under 50, $7,500 spread over the $15,000 single range means each dollar of modified AGI costs 50 cents of Roth room, and $7,500 over the $10,000 joint range means 75 cents. From age 50 the maximum contribution limit in step four is $8,600, so the same dollar costs 57.33 cents and 86 cents. And because the parenthesis excludes traditional IRA contributions from the starting limit, the annual ceiling is shared: a filer who already put money into a traditional IRA reduces the Roth room by that amount after this calculation, not before it.
Numbers to Re-check
- IRA limit $7,500, catch-up $1,100, total $8,600 · 2026 tax year · IRS Notice 2025-67 · announced each autumn for the following year.
- Deduction ranges $81,000 to $91,000, $129,000 to $149,000, $242,000 to $252,000, and $0 to $10,000 · 2026 tax year · same release · adjusted annually except the separate-return range.
- Roth ranges $153,000 to $168,000 single, $242,000 to $252,000 joint · 2026 tax year · same release · adjusted annually.
- Worksheet 1-2 percentages 70%, 80%, 35%, 40% · printed in the edition for 2025 returns · IRS Publication 590-A · the 2026 edition should carry 75%, 86%, 37.5% and 43% instead.
- Round up to the next $10, floor of $200 · line 4 note, Worksheet 1-2 · IRS Publication 590-A · confirm in the edition matching the filing year.
Where This Doesn’t Apply
None of the deduction arithmetic runs where nobody in the household is covered by a plan at work. It also does not run where compensation rather than income binds, since line 3 of Worksheet 1-2 caps the deduction at compensation for the year: a filer with $4,000 of earnings is held to $4,000 regardless of the range. A married filer who lived apart from a spouse for the entire year is treated differently from one who did not, which changes the Roth divisor. The $200 floor is a floor on the computed deduction, not a guarantee of a deduction, and it has nothing to say once modified AGI reaches the top of the range.
Nothing here decides whether a deductible contribution suits a household better than a Roth contribution. That comparison turns on the tax rate at contribution against the rate at withdrawal, on state treatment, and on whether a nondeductible contribution creates basis to track on Form 8606. Those are individual determinations. Figures in this article are for the 2026 tax year unless another year is named.
This article explains how the rules are written. It is not tax, legal, or insurance advice, and it does not account for any individual situation. Amounts and thresholds change; verify the current figures at the source listed above before acting, and consult a qualified tax professional about any particular return.
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