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For the programs that use Modified Adjusted Gross Income rules for income eligibility, certain expenses may be deducted from gross income to determine the amount of income to count. The deductions in this section apply ONLY to the following MA programs:
· Caretaker Relative;
· Pregnant Woman;
· Child;
· Adult; and
· KidsCare.
There are three types of deductions for the MAGI programs:
Deduction type |
Description |
Pre-tax deductions from gross income |
Deductions taken from income before taxes are deducted. Common pre-tax deductions include deductions for health insurance premiums, contributions to 401(k) retirement plans, and life insurance premiums. |
Adjustments to gross income |
Expenses and adjustments allowed for tax purposes to determine Adjusted Gross Income (AGI) are also allowed when determining income eligibility using MAGI rules. |
MAGI 5% FPL Disregard |
A deduction equal to 5% of the Federal Poverty Level (FPL) for the size of the income group. |
NOTE Pre-tax deductions and adjustments to gross income that occur more or less often than monthly are budgeted the same way as income for MAGI programs. See the table in MA604D for details.
Verified deductions taken out of a person’s income before taxes are allowed as a deduction from income for eligibility. The amount and the fact that it was taken out before taxes must be verified.
While proof of the expense or cost must be provided, the person does NOT have to file a tax return to get the deduction. Only “adjustments from gross income” are allowed as a deduction. While there are other credits and deductions allowed when filing a tax return, they are not allowed as a deduction from income. The following table gives an overview of each adjustment to gross income that may be allowed for MA:
NOTE The table does NOT include all of the IRS requirements for each adjustment. See IRS Publication 17 for full list of the requirements for each adjustment at http://www.irs.gov/publications/p17/index.html
Adjustment type |
Description |
Educator Expenses |
Eligible educators can deduct up to $250 of qualified expenses paid in the tax year. The maximum deduction is $500 for spouses who are both educators and filing jointly. |
Business Expenses of Reservists, Performing Artists and Fee-Basis Government Officials |
These expenses include: · Certain business expenses of National Guard and reserve members who traveled more than 100 miles from home to perform services as a National Guard or reserve member; · Performing arts-related expenses as a qualified performing artist; and · Business expenses of fee-basis state or local government officials. |
Health Savings Account Deduction |
A deduction for contributions made from a person’s income to a qualified HSA during the year. |
Moving Expenses |
For members of the Armed Forces, the costs of moving because of military orders. The new work site must be at least 50 miles further from the person’s old home than the old home was from the former workplace. |
Deductible Part of Self-Employment Tax |
A deduction for the employer-equivalent portion of self-employment tax. |
Self-Employed SEP, SIMPLE and Qualified Plans |
A deduction for contributions to a qualified retirement plan for the self-employed and clergy members. |
Self-Employed Health Insurance Deductions |
A deduction for the amount paid a self-employed person paid for health insurance for him or herself, spouse and dependents. |
Penalty on Early Withdrawal of Savings |
A deduction for penalties paid for early withdrawal of savings from certain financial accounts. |
Alimony Paid |
A deduction for payments to or on behalf of a spouse or former spouse under a spousal support agreement only when they meet both of the following conditions: · Created on or before 12/31/2018; and · Has not been modified after 12/31/2018 to specifically state that the Tax Cuts and Jobs Act treatment of spousal support now applies. |
IRA Deduction |
Contributions made to a traditional IRA during the tax year may be deducted. The person must have earnings in the year to qualify for the deduction. |
Student Loan Interest Deduction |
A person may take this deduction if all of the following apply: · The person paid interest in the tax year on a qualified student loan; · The person is not married filing separately; · The person’s modified adjusted gross income is less than $75,000 if single, head of household or qualified widow(er), or $155,000 if married filing jointly; and · The person is not claimed as a dependent on someone else’s tax return. |
When a customer meets the non-financial requirements for a MAGI program but is over the income limit, a deduction equal to 5% of the FPL for the customer’s budget group size is given.
When the customer could qualify for more than one MAGI program, the deduction is only applied when the customer does not meet the income limit for any of those MAGI programs. The deduction is applied in the income test for the MAGI program with the highest income limit.
For examples, see Modified Adjusted Gross Income (MAGI) Deductions Examples.
The following table lists the MAGI 5% FPL Disregard by budget group size:
Number of people in the Budget Group |
5% Disregard Amount Effective 2/1/2022 |
5% Disregard Amount Effective 2/1/2023 |
1 |
$57 |
$61 |
2 |
$77 |
$83 |
3 |
$96 |
$104 |
4 |
$116 |
$125 |
5 |
$136 |
$147 |
6 |
$155 |
$168 |
7 |
$175 |
$190 |
*Each additional person, add: |
$20 |
$22 |
* “Each Additional” Approximate Amounts Only.
Term |
Definition |
Adjustments to gross income |
Expenses or deferred income subtracted from gross taxable income to determine a person’s Adjusted Gross Income (AGI). Also known as “above the line deductions” because they are listed above the line on the first page of the federal tax return where the AGI is calculated and entered. |
Health Savings Account (HSA) |
A tax-exempt account that is set up to pay or reimburse certain medical expenses. |
Individual Retirement Account (IRA) |
A form of individual retirement plan that is provided by a financial institution. |
Non-Financial Requirements |
The requirements to qualify for an AHCCCS Medical Assistance program that are not related to a customer’s counted income or resources. |
Tax Year |
Is the same as the calendar year; January 1 through December 31. |
Proof for these deductions varies based on the type of deduction. Some examples of what can be used for proof include:
· Bills;
· Business records;
· Receipts;
· Bank account statements;
· Paychecks or paystubs;
· Current tax returns if the amount is anticipated to be the same; and
· Any other documents that support the expense or adjustment.
This requirement applies to the following programs:
Program |
Legal Authorities |
Adult Caretaker Relative Pregnant Woman Child KidsCare |
42 CFR 435.4 42 CFR 435.603
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