Medical Assistance Eligibility Handbook
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312.4 Income

When deciding on an individual’s eligibility in a MAGI MA-related category, the CAO must count the monthly earned income and unearned income of every individual included in the individual’s tax household.

42 CFR435.603(d)

 

MA financial eligibility is based on current monthly household income in most scenarios. For MAGI MA, some determinations must be reviewed for eligibility based on an annualized calculation. (See Section 312.43, Annualized Income)  

 

Counted and excluded income for MAGI is based on what is included in Adjusted Gross Income (AGI) when filing a tax return with the Internal Revenue Service (IRS). The following income types are not typically included in AGI, but are considered countable for MA purposes:

 

NOTE: To determine if RSDI is counted for a child or tax dependent see (Section 312.44, Income of Children and Tax Dependents).  

 

 

Certain excluded types and sources of income for MAGI-related MA are listed in this chapter. They are not counted in the MA financial eligibility decision.

42 CFR435.603(e)

 

The applicant /recipient must apply for or obtain any potential source of income available to them. If an individual is cooperating with pursuing potential sources of income, MA must not be rejected, closed or delayed. An individual who, without good cause , does not cooperate in obtaining potential benefits is ineligible for MA. MA should not be delayed or terminated for an individual whose responsible caretaker/relative fails or refuses to apply for potential benefits available to them or the individual.

55 Pa. Code § 181.1(d) 

 

Potential benefits include, but are not limited to, the following:

 

 

NOTE: Early retirement Social Security benefits are considered a potential benefit when the individual reaches age 62. The CAO will grant good cause to an individual from applying for early retirement if they are under their full retirement age and working an average of 30 hours or more per week. (See Section 350.121, Early Social Security Retirement - Good Cause.)

 

 

312.41 Earned Income

The CAO must count payments for services as earned income. Earned income includes, but is not limited to the following:

 

 

NOTE: Because MAGI uses IRS guidelines for determining household income, all expenses reported on the household's 1040 Schedule C (Profit or Loss from Business) are allowable deductions for MAGI. This includes offsetting self-employment losses against other income reported on the IRS form 1040 (see Section 312.53, Offsetting Self-Employment Losses).

 

 

The CAO must get proof of all earned income and include the proof and the amount in the case record in accordance with

Section 312.61, Verification Requirements.

42 CFR 435.948(a)(6)

312.42 Unearned Income

The CAO must look at the total amount of unearned income in the household when determining MAGI-related MA eligibility.

Unearned income includes, but is not limited to, the following:

 

NOTE: RSDI income of a child or tax dependent may or may not count for MAGI-related MA. (See Section 312.44, Income of Children and Tax Dependents).

 

 

NOTE: If the rental property is not managed by third party consider the income self-employment.

 

 

NOTE: A prize is a cash payment won in a contest, lottery, or game relating to luck. An individual usually gets an award because of a decision by a court, board of arbitration, or similar legal body. 

 

An individual may receive a prize as a lump sum or in regular payments.

 55 Pa. Code 140.61

 

 

 

          • Cash support does not count:

 

Example 1: An uncle gives $200 every month to his 25 year old nephew. The uncle does not claim the nephew as a tax dependent. The uncle does not expect his nephew to repay this money. The $200 is not counted in the nephew's monthly unearned income.

 

Example 2: A mother gives $200 every month to her 19 year old son, who she claims as a tax dependent. The mother does not expect her son to repay this money. The $200 is not counted in the son’s unearned income.

 

Example 3:  A mother gives $200 every month to her 19 year old son, who she does not claim as a tax dependent. The mother does not expect her son to repay this money. The $200 is not counted in the son’s unearned income.

 

          • Cash support does count:

 

Example 1: A daughter gives $200 every month to her elderly mother, who she claims as a tax dependent. The daughter does not expect her mother to repay this money. Count the full amount after the first $50. The mother's countable cash support is $150 per month.

 

Example 2: A grandmother gives $200 every month to her 19 year old grandson, who she claims as a tax dependent. The grandmother does not expect her grandson to repay this money. Count the full amount after the first $50. The grandson's countable cash support is $150 per month.

                       

 

 

 

 

 

NOTE: Cash support is money received on a frequent and regular basis with no expectation of repayment.

 

NOTE: Child support is not considered cash support.    

 

The CAO must verify all unearned income and include the proof and the amount in the case record in accordance with

Section 312.61, Verification Requirements

 42 CFR 435.948(a)(6)

42 CFR 435.603(f)(2)

42 CFR 435.603(f)(3)

 

312.43 Annualized Income

If a MAGI budget group's monthly income (earned and/or unearned) exceeds the monthly income limit and the income is expected to decrease or terminate, an annualized income calculation must be performed. The expected decrease or termination must be verified in accordance with Section 312.61 Verification Requirements and Section 312.62 Reasonable Compatibility.  

 

42 CFR 435.603(h)(3)

 

To determine annual household income, total the household's countable earned and unearned income from January 1 through December 31 of the year in which the eligibility is being determined and compare to the annual income limit.

 

Example: Mary (37) is a single adult who applies for health care. She works part-time as a school bus driver. Her current monthly income of $2,000 exceeds the 133% monthly income limit (even with the 5% income disregard applied) for health care coverage (one-person 2024 household limit is $1,670 per month and the 5% disregard is $62.75). However, Mary indicates that she does not work at all for the months of June, July and August each year and has provided verification from her employer. Her annual income beginning January 1 and ending December 31 would be $18,000 ($2,000 x 9 months). The 133% annual income limit for a one-person household for 2024 is $20,030. When her income is annualized, it is under the 133% annual limit and Mary is eligible for health care coverage. 

Example: John (46) is applying for healthcare for himself and his son, Doug (14). He submits his application to the CAO on June 29. John was working full-time up until this point. He had an accident at home and indicates that he will be out of work until September 1. John’s monthly wages were $2,500 per month and he received his most recent pay on June 26. He has verification from his employer that he will not receive another pay until he returns to work. John’s income in the application month exceeds the 133% monthly income limit (even with the 5% income disregard applied) for health care coverage (two-person 2024 household limit is $2,266 per month and the 5% disregard is $85.20). His annual income beginning January 1 and ending December 31 would be $25,000 ($2,500 x 10 months). The 133% annual income limit for a two-person household for 2024 is $27,186. Both John and Doug would qualify for health care.

Example: Betty (59) is applying for healthcare for herself. She submits an MA application on June 14. She is receiving unemployment compensation of $2,340 per month. Her current monthly income exceeds the 133% monthly income limit (even with the 5% income disregard applied) for health care coverage (one-person 2024 household limit is $1,670 per month and the 5% disregard is $62.75). Betty provides verification that her unemployment compensation will run out at the end of June. Her annual income beginning January 1 through December 31 would be $14,040 ($2,340 x 6 months). The 133% annual income limit for a one-person household for 2024 is $20,030. When her income is annualized, it is under the 133% annual limit and Betty is eligible for health care coverage.

312.44  Income of Children and Tax Dependents

To determine if the MAGI-related income of a child (under age 19) or tax dependent is countable review these two factors:

 

 

Child or Tax Dependent Living with Biological, Adoptive or Step-Parent

 

 

Example: Mary applies for MA for herself and her son, Marty (16). Mary will file taxes and will claim Marty as a dependent. Marty works part-time and his annual earnings exceed the tax filing threshold for a child or tax dependent. When determining eligibility for both Mary and Marty, Marty’s income is counted.

 

42 CFR 435.603 (d)(2)(i) 


Example: Steve applies for MA for himself and his daughter, Amy (17). Neither Steve nor Amy will file taxes, and Amy will not be claimed as a dependent. Amy works part-time and has earnings under the tax filing threshold for a child or tax dependent. When determining eligibility for Steve and Amy, Amy’s income is not counted.

 

NOTE: The Social Security benefit and Railroad Retirement Tier 1 benefit do not count toward the unearned threshold. See Appendix C for Filing Requirements for Tax Dependents.

 

Child or Tax Dependent Residing with Non-Parent

 

 

Example: Pauline has custody of her granddaughter, Olivia (8) and is applying for MA for both herself and Olivia. Pauline will claim Olivia as a tax dependent. Olivia receives $775 per month in RSDI (Survivor’s). When determining Olivia’s eligibility, all of Olivia’s income will count in her determination.

 

 

 

 

Example: Pauline has custody of her granddaughter, Olivia (8) and is applying for MA for both herself and Olivia. Pauline will claim Olivia as a tax dependent. Olivia receives $775 per month in RSDI (Survivor’s). When determining Pauline’s eligibility, none of Olivia’s income will count in Pauline’s determination.

 

NOTE: In some situations, an adult can be claimed as a tax dependent.  See Appendix D for Tax Dependent Criteria.

 

NOTE: The Social Security benefit and Railroad Retirement Tier 1 benefit do not count toward the unearned threshold. See Appendix C for Filing Requirements for Tax Dependents.

 

312.45 Excluded Income

The CAO must not count income from certain sources when deciding whether an individual qualifies for MAGI-related MA.

 

The CAO must verify and record the reason for excluding the income. It may be necessary to verify the amount of excluded income.

 

The CAO must not count the following excluded income for MAGI-related MA: 

 42 CFR 435.603(e)

 

 

 42 CFR 435.603(e)(1)

 

NOTE: To be considered a gift, a monetary gift must be infrequent and nonrecurring.

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A difficulty of care payment is money paid to a non-relative or relative who is under contract with a public or private agency to give care to a person with a physical, emotional, or mental disability in their home. In order to exclude this income, the CAO must verify the income as a Difficulty of Care payment authorized by a state or local authority. These payments come under other program titles, including the following:    

 

 

NOTE: A Family Living Services payment may come as one payment or as two payments (one for services and one for room and board).

 

 

 

NOTE: Care providers do not have to be related to the are recipient in order for the income exclusion to apply.  

   

 

 

 42 CFR 435.603(e)(3)(ii)

 

 

42 CFR 435.603(e)(3)(iii)(A)

 

 

42 CFR 435.603(e)(3)(iii)(B)

 

 

 

 

26 CFR § 1.107-1

 

 

Updated April 17, 2024,  Replacing March 15, 2022