The CAO must allow specific disregards and deductions from the gross income of the MAGI household.
The only income disregard applied in MAGI eligibility determinations is a disregard of 5 percent of the 100 percent FPIG for the budget family size (See Section 312.62). The 5 percent disregard is applied only if the disregard would make a difference in the eligibility determination.
Certain tax deductions reported to and verified with the CAO or FFM may be used as deductions from gross income, (See Appendix E).
Certain federal tax deductions may be taken from the MAGI household’s gross income, (See Appendix E). Allowable federal tax deductions are reported on page one of the IRS Form 1040.
Reminder: Individuals whose eligibility is determined using non-filer rules cannot have tax deductions.
A tax deduction reported on the MA application by the MAGI household must include a begin date, an end date if applicable, a frequency and an amount. This information will be used to determine the monthly amount of the deduction. Any deduction with an end date before the month of the eligibility start date is not an allowable deduction. A deduction with an end date in the eligibility month, after the eligibility month or with no end date may be an allowable deduction, to be deducted from gross income for as many months as the reported frequency indicates or until eligibility is re-determined, whichever is sooner. Tax deductions are not applied if there is no countable income.
Example: A MAGI-related application is processed with an eligibility start date of 3/20/2014, the MAGI household reports and verifies alimony of $100 expected to occur monthly with a begin date of 1/1/2014 and no end date. This is an allowable deduction from the month of March 2014, because it is expected to continue through the eligibility period.
Example: An application is processed for MAGI MA with an eligibility start date of 3/20/2014. The MAGI household reports and verifies a one-time job-related moving expense of $400 with a begin date of 2/1/2014 and an end date of 2/3/2014. This is not an allowable deduction, because it does not exist within or after the eligibility month.
Allowable tax deductions from the MAGI household’s gross income include:
Student loan interest.
Self-employed health insurance.
Deductible part of self-employment tax.
Health savings account deduction.
Educator expenses.
Certain business expenses of reservist, performing artist and fee-basis government officials.
Job related moving expenses.
Self-employed SEP, SIMPLE and qualified plans.
Penalty on early withdrawal of savings.
Alimony paid.
IRA deduction.
Tuition and fees.
Domestic production activities.
Note: income deductions that are not verified will not be counted.
Some income tax deductions have a maximum allowable amount. These maximum amounts are listed in Appendix E.
When determining financial eligibility for MAGI MA, the income disregard of 5 percent of the 100 percent FPIG is applied after any other allowable deductions. The 5 percent disregard is applied only if the disregard will make an individual eligible for MA. If income after the disregard is at or below the threshold, the client is income eligible.
Example: A mother applies for MA for herself and her child age 6. Their combined monthly gross income is $1500. The CAO worker takes allowable tax deductions from gross income, and net income after tax deductions is $1300. The applicable 2 person FPIG is $1744 for the child, 133 percent of FPIG, (See Appendix B.) The 5 percent disregard will not be applied as the child is eligible for MAGI MA without the disregard. The applicable 2 person FPIG is $433 for the mother, 33 percent of FPIG, (See Appendix A.) The 5 percent disregard of $65.55 is applied to determine income eligibility for the mother. The mother’s net income after the 5 percent disregard is $1234.45. The mother is over income limit for MAGI MA.
Issued September 19, 2014