Treatment of Income for MAGI and Non-MAGI

Actual Income

Income is considered available in the month received unless it is apportioned over a period of time (i.e. teacher’s salary).

Treatment of Apportioned Income

Apportioned income is income that is earned and received in more than 8 but less than 12 months under an annual contract of employment. It must be prorated over the period of the contract beginning with the first month of the contract.

Example Example Teacher's contracts are annual and income must be apportioned over the 12 months of the contract, even though teachers may work only 9 or 10 months. 

Income Received other than Monthly or Semi-Monthly

  1. If income is received weekly, bi-weekly, quarterly or bi-monthly, AND
    1. Client wants MC for three or more months, and
    2. Client will receive the income for a full month, and
    3. Income is not fluctuating, THEN
  2. Convert to monthly income as follows:
    1. Multiply weekly income by 4.33.
    2. Multiply income received every two weeks by 2.167.
    3. Divide quarterly income by 3.
    4. Divide income received every two months by 2.
      1. Example 1  Example 1  Client receives DIB of $265 every two weeks. Calculate as follows to arrive at a monthly amount: $265 x 2.167 = $574.26/mo.  
      2. Example 2   Example 2   Client receives earnings of $350 gross every week. His/her gross amount does not fluctuate. Calculate as follows to arrive at a monthly amount: $350 x 4.33 = $1,515.50/monthly. 
  3. If client wants MC for one or two months only, use actual income.

Self-Employment Income

Income of self-employed persons is an estimation of the net profit of the annual net income for the current year based on the federal tax return filed for the previous year. If there is no tax return or there is evidence that using the tax return would give an inaccurate estimation of income, current business records must be used.

Loans

A loan must be considered income and apportioned over the time period for which it is intended if:

  • It does not require repayment, and
  • It is not exempt, and
  • It is specified in the loan statement the period of time it is intended to cover.

Interest Income

  • Interest income received less frequently than monthly and not exempt must be apportioned by dividing interest received by the number of months in the interest period. Consider the converted monthly amount as income in each of the months of the next interest period.
  • Interest income received from a deed of trust or contract of sale must be apportioned by determining the annual interest and dividing by 12.

Note: Be sure to evaluate whether interest income could be exempt as irregular or infrequent income.

Apportionment of Income Exemptions and Deductions

Any exemptions or deductions pertaining to apportioned income must be apportioned in the same manner as the income.

Example Example Client receives $375 gross earnings every week and pays $30 every week for dependent care. Income and deductions are: $375 x 4.33 = $1,623.75 gross income; $30 x 4.33 = $129.90 dependent care. 

Reminder: Dependent care deductions only apply to Non-MAGI MC budgeting. Dependent care deductions are limited to maximum allowable amounts (i.e. $175 or $200 based on the age of the child).

Fluctuating Income

For combo cases the income must follow the rules and regulations of that program (i.e. CF/MC, GA/MC, etc.) methodology.

For MC only cases, if the client provides pay stubs showing different amounts, the income must be averaged and entered as monthly income. The multipliers must not be used.

Example Example Client provides 8 pay stubs for January and February. Each stub shows different amounts and he/she gets paid weekly. Do NOT enter each pay stub as CalSAWS considers the most current pay stub information and uses the frequency multiplier. The EW must manually add the 8 pay stubs and divide it by 2 and enter the averaged income into CalSAWS as Monthly. 

Per regulations, the client is only required to provide one pay stub, whether the income is stable or fluctuating. If a client only provides one pay stub and income is determined to be fluctuating income, compute the monthly income amount using the multiplier. The EW must thoroughly document in Journal page on how the income is calculated or determined.

If the pay stub provided includes overtime, the EW must clarify with the client if the overtime is expected to continue. If not, explain to the client if he/she can provide additional pay stub if averaging the income is more advantageous.

CalSAWS

Income information (earned or unearned) is entered into CalSAWS as follows:

  • Income Frequency that is verified or self-attested (weekly, bi-weekly, semi-monthly, bi-monthly, etc.) should be entered as the actual pay frequency.
  • Apportioned Income  If the apportioned income is for a period of 12 months, divide the yearly amount by twelve and enter the averaged amount as monthly income.
    • Example Example Teacher’s annual contract is $72,000. The EW should enter the monthly income as $6,000. 

Documentation Requirements

It is very important to document the treatment of estimated, apportioned and fluctuating incomes. Documentation must indicate how the non-exempt unearned/earned gross income figure was calculated. Verification or proof that income was verified must be recorded in Imaging.

Related Topics

Budgeting