All Medicaid Programs |
Obsolete Policy |
Effective Date: September 1, 2020 - October 31, 2021
A. Income based on tax rules
For MAGI-based programs, count taxable income that is used to determine an individual or couple's gross taxable income. In addition, certain types of income that are not taxable have to be added to the gross taxable income, and some types of income a person receives do not count in the MAGI-based income methodology. See section 450-2 for examples of pre-tax deductions.
B. Countable Income
1. Types of taxable income: The following types of income count as income for tax purposes and compose the gross income on an individual's tax return. Effective with tax returns for 2018 income, some of these types of income are reported on the Schedule 1 form that would be filed with an individual's IRS Form 1040-Individual Income Tax Return.
a. Wages, salaries, tips, which include but not limited to (405-1 & 405-4):
o Sick and vacation pay which is paid by their employer;
o Temporary census income; and
o Income in-kind benefits, such as housing provided by an employer that are part of the individual's taxable income from earnings.
b. Taxable interest (This can include interest earned from a sales contract that a person receives. See 403-9)
c. Ordinary dividends
d. Taxable refunds, credits, or offsets of state and local income taxes
e. Alimony received. Beginning January 1, 2019, some alimony will not count as income. (See 403-6 and 450-2.)
f. Business income (i.e.: self-employment). (A business loss may also appear here, as per IRS rules-IRS Schedule C or C-EZ) [If additional verification from the client is required, see 405-2 and 405-3]
g. Capital gains (or loss) (This can be from sale of stocks, bonds, real property such as a home, or other personal property not used for business)
h. Other gains (or losses) (IRS form 4797, generally for business property, rental property, farmland, and livestock sold)
i. IRA distributions (taxable amount)
j. Pensions and annuities (taxable amount if different than gross)
k. Rental real estate income, royalties, partnerships, S corporations (from IRS Schedule E)
l. Farm income (or loss) (from IRS Schedule F)
m. Unemployment insurance
n. Social Security benefits (the taxable portion, if any)
o. Other income (as defined by IRS) These may include:
o Prizes, winnings or awards (See 450-2 for how to count lottery and gambling winnings),
o Alaska Permanent Funds dividends,
o Taxable amounts from certain educational savings accounts or health savings accounts, etc.
o Some of these sources may be reported to the individual on an IRS1099-MISC form and could be lump sums that only count in the month received.
o Cash contributions, see 450-2 and 450-3 to see restrictions on counting cash gifts or contributions as income.
2. Add-Back income: To determine the MAGI-based income for Medicaid eligibility, some income types must be added to the client's gross taxable income even though it is not taxable.
a. The portion of Social Security benefits that was not taxable (If none of the Social Security benefit is taxable, or if the individual does not have to file a tax return, this will be the full amount of the Social Security benefits.)
o When determining countable income, count the gross amount of Social Security benefits. If you are using a tax return to determine a person's income, decide if part of the adjusted gross income includes a taxable portion of Social Security benefits. If so, then add back the portion that was not listed as taxable (the non-taxable portion.) Some types of royalties may be reported as other income.
o Do not count more than the gross amount received in the month.
o If a dependent child receives Social Security income, see 450-2 to decide when it could count.
b. Non-taxable interest income (such as interest earned on municipal bonds.) These amounts may be reported as an annual amount. Prorate over the 12 month certification period to find the monthly amount.
c. Foreign earned income that is excluded from taxable income. (Only count this income to the extent it is currently being received and/or will continue to be received during the upcoming certification period.)
C. Additional Requirements for Medicaid
1. Lump sum payments are countable for Medicaid eligibility, but only in the month the payment is received. (Some types of lump sum income are excluded from countable income (407). See 450-2 for types of settlements that might count and may be paid as a lump sum.)
2. Educational scholarships, awards, and fellowship grants used for educational expenses do not count as income. Count only the portion of educational income that is used for living expenses or other non-educational related expenses.
3. Certain income of American Indians/Alaska Natives is excluded from income. (403-4.12)
The gross countable income will be the sum of the taxable income, plus any add backs, and any lump sum or countable educational income.
See 450-2 for income that does not count for MAGI-Based programs and for treatment of various other types of income.