The earned income deductions for TANF-related categories apply to PC/PU individuals and to PD parents or stepparents who live with a child who receives TANF, MA or SSI.
The earned income deductions for GA-related categories apply to all other PD individuals.
The deductions from unearned income are the same for the TANF/GA-related categories and TANF ineligibles.
Each employed individual in a TANF-related category must receive deductions from gross earned income, in the following order:
1. Work expenses (see Section 360.211).
2. Earned income incentive deduction, if the individual is qualified to receive the incentive (see Section 360.212).
3. Dependent care expenses (see Section 360.213).
Each employed member of the applicant/recipient group is allowed a deduction of $120 per month from total gross earned income.
The CAO must allow a 50% gross earned income incentive deduction, after the work-expense deduction, for each employed individual who qualifies for the incentive.
An employed individual qualifies for the incentive if the individual is any of the following:
A recipient of NMP in the PC or PU category.
A recipient of NMP in a PD category whose child or stepchild, including an unborn child, lives in the household and gets TANF, MA or SSI.
An applicant who has received cash assistance or MA in a TANF-related category (including Healthy Beginnings) in one of the four calendar months before the month of application.
An applicant who has received cash assistance or MA in a GA-related category in one of the four calendar months before the month for which eligibility is being considered and whose child or stepchild in the household was receiving TANF, MA or SSI at the same time.
An applicant who does not
meet any of the above conditions but who is eligible through the incentive
eligibility test.
The CAO must apply
the incentive eligibility test at application, as follows:
1. Figure out the gross earned and unearned income of each employed applicant in the month when he or she applies.
2. Subtract the work expense deduction ($120) and dependent care expenses from the gross earned income.
3. From the gross unearned income, subtract any expenses the applicant must pay to receive the income. (See Section 360.23, Unearned income deductions—TANF/GA-related.)
4. Add the employed applicant's net earned and net unearned income.
5. Add the applicant's total net income to the countable net income of the other applicant/recipient group members.
NOTE: If another applicant/recipient group member is employed, allow the $120 work expense deduction, expenses and the earned income incentive deduction if that individual is qualified to get the incentive.
6. Compare the total net income of the applicant group with the Standard of Need in Appendix A. Include the unborn child of a pregnant woman who is included in the applicant/recipient group.
If the net income is equal to or less than the Standard of Need, the individual is eligible for the earned income incentive deduction.
If the net income is more than the Standard of Need, the individual is not eligible for the earned income incentive deduction. Decide on the individual’s eligibility for NMP without the incentive.
An employed individual can receive a deduction for the cost of care for a dependent child or a sick or incapacitated individual if both of the following conditions are met:
The child or incapacitated individual lives with the employed individual.
NOTE: The child or incapacitated individual does not have to be a recipient.
No other good plan can
be made for the dependent individual’s care
.
The amount of the
deduction must be the actual cost to the individual, up to the following
limits:
When the employed individual works full-time: $175 per month for each child aged two or older or incapacitated individual.
When the employed individual works part-time: $150 per month for each child aged two or older or incapacitated individual.
No matter whether employment
is full or part-time: $200 per month for each child under age two.
If the CAO sees
that a part of the dependent care expenses is not work related, it must
figure out what part of the expenses is for work related hours.
Example: Ms. R. pays $150 a week for childcare while she works and goes to college part-time. The babysitter cares for her child for nine hours a day, five days a week, while she works. She also cares for the child a total of five hours a week while Ms. R. goes to college. Childcare is provided for a total of 50 hours a week. Childcare is provided for 45 hours while Ms. R. works. The total hourly rate is found to be $3 an hour ($150 ÷ 50 hours). The total allowable childcare expense is $135 a week (45 hours × $3 an hour).
Each employed individual in a PD category receives deductions from earned income in the following order:
1. Work and individual expenses (see Section 360.221).
2. Earned income incentive deduction, if the individual is qualified to get the incentive (see Section 360.223 and Section 360.224).
The CAO deducts actual work and individual expenses up to $25 per month. Work and individual expenses include, but are not limited to, expenses related to employment such as the following:
Transportation.
Dependent child and adult care.
Union dues.
Uniforms.
Deductions for federal, state, and local taxes.
The CAO allows for an earned income incentive deduction of $20 plus 50% of the next $60 of earned income for each employed individual who qualifies for the incentive. The incentive is applied to the income that is still left after the work and individual expense deductions.
The incentive can
be used for up to four months in a row. An
individual who has received the deduction for four calendar months in
a row cannot get it again until 12 months in a row have passed since the
individual last received NMP in the PD category.
NOTE: The 12-month
period begins with the month following the month NMP is stopped. Getting
an earned income incentive in another program or category during the 12-month
period must not affect the individual’s eligibility for the GA-related
incentive for NMP.
For information
about breaks in the four months in a row, see Section
360.224.
The CAO must keep track of when the individual receives the earned income incentive in the case record.
The CAO must set an alert to look at MA without the earned income incentive at the end of the fourth month.
Before applying
the earned income incentive deduction, the CAO must consider all of the
following:
Is the employed individual qualified to get the incentive? (See Section 360.223.)
Did the individual receive the incentive for four months in a row? If so, have twelve months in a row passed since the individual last got PD?
Have the four months of incentive been interrupted? (See Section 360.224.)
Is there any income left over after other deductions are taken?
If the individual’s
net income is zero after the work and individual expenses are deducted,
the CAO must treat this as a break and must not use the earned income
incentive deduction or count this as a month in which the incentive was
used.
If any income is
left after the work and individual expenses are deducted, the CAO must
apply the incentive. The incentive must be applied even if the applicant/recipient
group is eligible without it. The individual is not given the choice of
using incentive.
Exception: For retroactive NMP, if the individual qualifies to receive the incentive, he or she can choose whether to use the incentive. If the incentive is applied to a retroactive month, that month must be counted as one of the four months in a row. The CAO must explain the choices to the individual.
The earned income incentive deduction is allowed only if the employed individual:
Has not received the incentive for four months in a row or has received the incentive for four months in a row but has not received NMP in the PD category for at least 12 months in a row.
Qualifies for the incentive.
NOTE: Receiving a work incentive deduction in another category of MA does not disqualify the employed applicant/recipient from receiving the work incentive deduction for NMP in the PD category.
The employed individual qualifies for the incentive if he or she is:
A recipient of NMP in the PD category.
An applicant who has received cash assistance or MA in a GA-related category in one of the four calendar months before the month of application.
An applicant who does not meet either of the above conditions but who is eligible through the incentive eligibility test.
The CAO must apply the incentive eligibility test at application, as follows:
1. Figure out the gross earned and unearned income of each employed applicant in the month when he or she applies.
2. Subtract the work expense deduction and dependent care expenses from the gross earned income.
3. From the gross unearned income, subtract any expenses the applicant must pay to receive the income. (See Section 360.23, Unearned Income Deductions—TANF/GA-Related.)
4. Add the employed applicant's net earned and net unearned income.
5. Add the applicant's total net income to the countable net income of the other applicant/recipient group members.
NOTE: If another applicant/recipient group member is employed, allow the work expense deduction, and the earned income incentive deduction if that individual is qualified to get the incentive.
6. Compare the total net income of the applicant group with the Standard of Need in Appendix A. Include the unborn child of a pregnant woman who is included in the applicant/recipient group.
If the net income is equal to or less than the Standard of Need, the individual is eligible for the earned income incentive deduction.
If the net income is more than the Standard of Need, the individual is not eligible for the earned income incentive deduction. Decide on the individual’s eligibility for NMP without the incentive.
The CAO must use
the following rules when there is a break in the individual’s getting
four months in a row of the incentive deduction of $20 plus 50% of the
next $60 of earned income:
If NMP is stopped before the individual has received the incentive for four months in a row, the individual is eligible for a new four-month period.
If the individual’s net income is zero after the work and individual expenses are deducted, that month is not counted and the individual is eligible for a new four-month period.
If the individual has not received the incentive for four months in a row because of loss of income, the individual is eligible for a new four-month period.
If
the individual decides to receive the incentive in a retroactive month,
that month counts as one of the four months in a row if continuing
NMP is approved. If the incentive is used for less than four months
in a row during the retroactive period
and continuing NMP is not approved, the individual is eligible for
a new four month period if he or she applies again a full calendar
month after the retroactive period.
Example: An individual applies for NMP on December 15. The retroactive period is September 1 through December 14. The individual uses the earned income incentive for PD eligibility for October.
If continuing PD is approved as of December 15, the CAO counts the incentive used in October. If continuing PD is approved as of January 1, the CAO counts the incentive used in October, because a full calendar month has not passed after the retroactive period.
If continuing PD is not approved and the individual applies on or after February 1, that is a break for the individual receiving the incentive. The individual starts a new four-month period.
NOTE: If retroactive MA for October is approved in an MNO category, that month of incentive does not affect the receipt of the incentive for NMP.
Each individual with countable unearned income can deduct expenses needed to be eligible for or to receive the income. These expenses include, but are not limited to, the following:
Bank fees for an account that is used for the unearned income. These include the cost of standard checks, minimum-balance and per-check fees and ATM fees.
Attorney fees.
Court costs.
Transportation costs, including costs of receiving the unearned income. This can be the actual cost of public transportation or the cost of using another individual’s car. If an individual uses their own car, the CAO must use the current mileage reimbursement rate established by the U.S. General Services Administration (GSA) (currently 0.67 cents per mile). Effective: January 1, 2024.
The replacement cost of real or individual property that is covered by an individual damage award or insurance settlement.
The CAO must deduct replacement costs as follows:
Deduct the proven cost that it would take to repair the property.
For the replacement cost of the property, deduct the largest of the following:
The value set by the individual paying the award or the insurance company.
The value set at the last renewal before the damage minus the value after the damage.
The value that would have been assigned, such as the fair market value of a vehicle.
The proven value of the property at the time of the loss.
Expenses directly related to the type of income, such as charges for burial from an insurance benefit or medical expenses from an individual injury award.
Expenses related to receiving rental income (see Section 360.4, Deductions from Unearned Rental Income).
The amount of delayed or retroactive benefits that must be paid to DHS under a reimbursement agreement.
Updated January 24, 2024, Replacing August 12, 2022