Income Deductions

Deductions from Unearned Income

Educational Expenses

Expenses incurred by an individual attending college or a similar training course must be deducted from:

  • Any income received for educational purposes, including but not limited to:
    • Exempt student loans, grants, scholarships or fellowships.
    • Nonexempt student loans, grants, or fellowships which do not require repayment.
    • Payments to a child attending school which are based on a deceased or disabled parent's entitlement (i.e., Social Security, Veterans' Benefits).
    • Veterans' Educational Assistance Plan payments or the GI Bill.
  • Any loans received for educational purposes which require repayment and are not exempt loans, grants, scholarships or fellowships.

These verified educational expenses must be apportioned over the period of time they are intended to cover to determine the monthly deduction.

Example 1Example 1Client attends San Jose State University, which is on the semester system. He paid $475 in verified educational expenses, for the entire semester, which lasts from 8/17 through 12/17. His monthly deduction would be $475 /5 = $95 monthly.

Example 2Example 2Client attends De Anza College, which is on the quarter system. She paid $183 in verified educational expenses for the Winter quarter from 1/18 through 3/18. Her monthly deduction would be $183/3 = $61 monthly.

Educational expenses include any of the following items or services necessary for school attendance:

  • Tuition
  • Books
  • Fees
  • Equipment and supplies
  • Special clothing needs
  • Child care services
  • Transportation costs to and from school.

    • Note: If it is determined that a personal car meets this criteria, all actual transportation costs will be prorated based on the percentage of miles driven to and from school, compared to the total miles driven each month. Allowable transportation costs include, but are not limited to car payments, car insurance, vehicle registration and gasoline.

The verified educational expenses must first be deducted from any totally exempt loans or grants. Any remaining educational expense must next be deducted from other educational loans which require repayment and are not exempt, and finally from other income received for educational purposes.

ABD-MN MFBUs

These deductions must be subtracted from the nonexempt income of MFBUs which include ABD-MN individuals. These deductions are applied only if a member of the MFBU applied and is found eligible as aged, blind, or disabled. Each deduction applies only to the income specified.

Support Payment from an Absent Parent 

One-third of any payment made by an absent parent for the support of a disabled or blind child shall be deducted from the total payment.

“Any Income” Deduction—Unearned Income 

  1. Twenty dollars must be deducted from the combined nonexempt unearned income of all ABD-MN individuals and the spouse or parents of these individuals.
  2. Any portion of the twenty dollar deduction which may remain after the subtraction above must then be subtracted from the combined nonexempt earned income.

ExampleExampleMr. Abbott is disabled and receives $15 monthly in Veteran's Benefits. He is also employed and earns $930 monthly. He would receive the $20 deduction on the VA Benefits and the $5 remaining ($20-$15) would then be deducted from his earned income.

Court-Ordered Spousal or Child Support

Court-ordered spousal or child support, or child support paid pursuant to an agreement with the district attorney, must be deducted from the income of an MFBU which includes an ABD-MN individual when it is actually paid by someone in the MFBU.

The amount deducted must be the lesser of the amount:

  • Actually paid.
  • Specified in the court order or agreement with the district attorney.

Voluntary support payments are not an allowable deduction.

Income Necessary to Achieve Self-Support 

This deduction applies only to a blind or disabled person's earned or unearned income.

  • Deduct all the earned or unearned income if the plan for self-support:
  • Is in writing, and
  • Was initiated and approved while the person was receiving SSI/SSP, and
  • Has not been subsequently abandoned.

IHSS for ABD-MN and Substantial Gainful Activity (SGA) 

The amount actually paid for IHSS services provided to any ABD-MN person or to a SGA-disabled person must be deducted from the combined nonexempt income of the SGA-disabled or ABD-MN person.

Note: The amount paid to IHSS can change monthly so the deduction must not be allowed as an ongoing expense but entered when verification of the amount paid for a particular month is provided.

The cost of in-home supportive services can only be a deduction when the services are:

  • Provided by a person other than a family member living in the home and,
  • Determined necessary based on the IHSS needs assessment.

For ABD-MN individuals, the provisions of this section must be limited to individuals who, without IHSS, would require 24-hour-a-day care in a health facility or community care facility verified by a signed physician's statement.

Guardian and Conservator Fees 

Fees paid to a court-appointed guardian or conservator are allowable deductions from unearned income provided all the following conditions are met:

  • The fees are paid to a court-appointed guardian or conservator of an individual who has been declared by a court to be incapable of handling his/her own financial affairs and then only to the extent that the fees are actually owed in the month in which the payment is made.
  • A court-appointed guardian or conservator is required by the agency/entity paying the unearned income as a condition of rendering payment to incompetent individuals.
  • The guardian or conservator provides a signed statement from the agency/entity making such payment verifying the requirement as set forth above.

ExampleExample

Mr. Singh is a comatose, disabled individual. His representative applies for retirement benefits from ABC Corporation on Mr. Singh’s behalf. The ABC Corporation requires a court-appointed conservator prior to awarding the benefits to Mr. Singh’s representative. Mr. Singh’s representative also applies for MC benefits on Mr. Singh’s behalf. He provides our Agency with a letter from ABC Corporation stating the requirement of a court-appointed conservator. If the representative is appointed as Mr. Singh’s conservator by the court, and monthly fees are charged, these fees would be allowed.

ExampleExample

Santa Clara County Public Guardian’s Office is the court-appointed conservator of an individual who receives MC benefits under the ABD Program. This individual also receives RSDI disability benefits payable to the Public Guardian. The Public Guardian collects a monthly conservator fee. As the Social Security Administration does not require a court-appointed guardian or conservator as a condition to pay disability benefits, these fees would not be allowed as a deduction. The guardian or conservator must be informed of the above requirements when submitting guardian/conservator fees for processing.

AFDC-MN, MI, or Ineligible Members of the MFBU 

Court-ordered spousal or child support, or child support paid pursuant to an agreement with the district attorney, must be deducted from the income of an AFDC-MN or MI individual when it is actually paid by that individual. The amount deducted must be the lesser of:

  1. The amount actually paid.
  2. The amount specified in the court order or agreement with the district attorney.

Note: Voluntary support payments are NOT an allowable deduction.

All MN or MI Programs

The following deductions must be subtracted from any nonexempt income that remains after the application of all preceding exemptions and deductions.

  • That portion of income of an MN or MI individual or an individual responsible for the MFBU, which is counted in determining the eligibility of a spouse, parent, or child as a public assistance (PA) or other PA recipient must be deducted.
  • Income of a stepparent and the value of income in-kind provided by a stepparent which is counted in determining the eligibility of a spouse or stepchildren as PA or other PA recipients must be deducted.

Note: This computation must also be done when one or more family member receives an SSI/SSP grant or IHSS. These individuals are not included in the MFBU, but the computation must be done to determine how much of the family's income was used to compute their SSI/SSP grant or IHSS eligibility. This amount of income is called an “Allocation to SSI/SSP or IHSS recipient” and is deducted from the nonexempt income of the MFBU. The actual computation is completed by CalSAWS.

Health Insurance Premiums

Health insurance premiums must be deducted if paid by and purchased for any family member.If the premium is paid less often than monthly it must be averaged on a monthly basis.

ExampleExample

$66.00 premium paid quarterly
$66.00 /3 = $22.00 per month is the allowable deduction.

Health insurance premiums paid for by a nonfamily member (e.g.,absent parent) are not an allowable deduction.

Medicare Premium, Part B, must be deducted when actually paid by the client.

Allocation to Excluded Children 

The rules for allocation income deduction to excluded children apply to any MC program.

This deduction is applied only when children who have separate income and/or property have been excluded from the MFBU.

The amount of the deduction is equivalent to the difference in the maintenance need with the children in or out of the MFBU, minus any income of the excluded child/children.

ExampleExampleThe family consists of a stepfather, his wife and wife’s two separate children. The family decides to exclude the eldest child from the MFBU because the child receives $165 gift from his natural father each month. If the income standard for 4 is $1571 and $1306 for 3 (excluding the eldest child). The difference ($265) less the child’s own income of $165 is equal to the child’s unmet need of $100, which is allowed as an “income allocation” deduction for the excluded child, towards the MFBU’s budget.

If the children have enough income to meet their own needs based on this computation there is no allocation.

Deductions from Earned Income

ABD-MN MFBUs

The following deductions must be subtracted from the nonexempt earned income of MFBUs which include ABD-MN individuals. Each deduction will apply only to the income specified.

Student Earned Income Exclusion

The Student Earned Income Exclusion (SEIE) applies to all individuals in the MFBU who are working students under the age of 22, including those that meet the Supplemental Security Income program’s definition of a child.

Deductions must be taken from the earned income of each student who is under the age of 22, who is regularly attending school, and who is in the MFBU of an ABD individual. SEIE will apply to the earnings from an ineligible spouse or parent(s). It will also apply to the joint earned income of eligible couples who are both working students and under age 22.

The amount of the student income deductions increased in accordance with the table below.

Student Earned Income Exclusion Amounts

For Year

Monthly Exclusion

Maximum Exclusion for Calendar Year

2001

$1,290

$5,200

2002

$1,320

$5,340

2003

$1,340

$5,410

2004

$1,370

$5,520

2005

$1,410

$5,670

2006

$1,460

$5,910

2007

$1,510

$6,100

2008

$1,550

$6,240

2009

$1,640

$6,600

2010

$1,640

$6,600

2011

$1,640

$6,600

2012

$1,700

$6,840

2013

$1,730

$6,960

2014

$1,750

$7,060

2015

$1,780$

$7,180

2016

$1,780

$7.180

2017

$1,790

$7,200

2018

$1,820

$7.350

ABD-MN Student Deduction 

A maximum of $1,620 per calendar year is deducted from the nonexempt earned income of a blind or disabled person who is:

  • Under age 22, and
  • Not currently married, and
  • Not a parent, and
  • Enrolled or will be enrolled in a school for at least 8 hours per week during one month of either:
    • Current calendar quarter, or
    • Next calendar quarter.

The deduction of $1,620 is be applied beginning at the end of each year until exhausted.

“Any Income” Deduction 

That portion remaining from the “any income” deduction noted in the unearned income section, is the amount of the deduction. (It could be $20, if there is no unearned income.)

This applies to the combined nonexempt earned income of the parent /spouse of the ABD-MN individual.

Court-Ordered Spousal or Child Support 

Court-ordered spousal or child support, or child support paid pursuant to an agreement with the district attorney, must be deducted from the income of an MFBU which includes an ABD-MN individual when it is actually paid by someone in the MFBU.

The amount deducted must be the lesser of the amount actually paid or specified in the court order or agreement with the district attorney.

Note: Voluntary support payments are not an allowable deduction.

Sixty-Five Plus One-Half 

The first $65 plus 1/2 of the remainder must be deducted from the combined nonexempt earned income of all aged, blind or disabled individuals and the spouse or parents of those individuals.

There is no additional deduction for WRE or mandatory deductions. These are included in the $65 plus 1/2.

Work Expenses of the Blind 

In addition to the $65 plus 1/2 deduction, a blind individual is allowed a deduction for the actual cost of work related expenses from the nonexempt earned income.

This includes child care, clothing, tools, materials, licenses, personal incidentals, food, lodging, union or employee association dues, employment agency fees and transportation when required for employment.

Income Necessary to Achieve Self-Support 

This deduction only applies to a blind or disabled individual's earned or unearned income. Only the amount necessary to implement and maintain the plan for self support is deducted.

The deduction may equal the amount of earned or unearned income if the plan for self-support:

  • Is in writing (a copy of the plan must be obtained), AND
  • Was initiated and approved while the person was receiving SSI/SSP, AND
  • Has not been subsequently abandoned. Current receipts and a sworn statement are necessary to show active participation.

Note: A plan is drawn up between SSA and the SSI recipient. If the person continues to follow this plan after SSI discontinuance, the income spent on the plan can be deducted.

IHSS for ABD-MN and Substantial Gainful Activity Disabled (SGA)

The amount actually paid for IHSS provided to any ABD-MN person or to a SGA-disabled person must be deducted from the combined nonexempt income of the SGA-disabled or ABD-MN person and the responsible relative.The cost of in-home supportive services is a deduction only when the services are:

  • Provided by a person other than a family member living in the home, and
  • An IHSS needs assessment determined the services to be necessary.

For ABD-MN individuals, the provisions of this section is limited to individuals who, without IHSS, would require 24-hour-a-day care in a health facility or community care facility verified by a signed physician's statement.

AFDC-MN, MI, or Ineligible Members of the MFBU

The following deductions must be subtracted from the nonexempt gross earned income of each AFDC-MN or MI person, or individuals who are ineligible members of the MFBU. An AFDC-MN or MI person, or an ineligible member of the MFBU, cannot receive these deductions if they are included in the same MFBU as their aged, blind or disabled spouse or child.

Deduction for Work-Related Expenses (WRE) 

Effective October 1, 1989, ninety dollars ($90) for mandatory deductions and work-related expenses must be deducted from the earned income of each AFDC-MN or MI person.

Dependent Care

An individual is eligible for a deduction for dependent care when:

  • The person has reasonable and necessary costs of obtaining child care for a child in the MFBU or care for an incapacitated person in the MFBU, AND
  • The EW determines that adequate dependent care cannot be provided by another member of the MFBU.

Note: This deduction will generally not be applicable against Disability Insurance Benefits (DIB) because the DIB recipient will be available to care for the children. It is allowable only if there is no other family member able to care for the child(ren) and the DIB recipient is too disabled to care for the chil(dren).

The amount deducted is the actual amount paid as limited by the following:

  • A maximum of $200 per child under two years old.
    • Note: The EW will need to set a case alert for the month prior to the child's second
  • birthday, in order to change the deduction for dependent care.
  • A maximum of $175 per child two years of age or older.
  • A maximum of $175 per incapacitated person.

This deduction also applies when the care is provided by a member of the MFBU, other than a spouse or parent, who terminated employment specifically to provide the necessary care.

Spousal or Child Support

Court-ordered spousal or child support, or child support paid pursuant to an agreement with the district attorney, must be deducted from the income of an AFDC-MN or MI recipient when it is actually paid by that individual

The amount deducted is the lesser of the amount:

  • Actually paid.
  • Specified in the court order or agreement with the district attorney.

Note: Voluntary support payments are not an allowable deduction.

All MN or MI Programs

The following deductions must be subtracted from any nonexempt income that remains after the application of all preceding exemptions and deductions.

  • Income of an MN or MI individual used to determine public assistance eligibility of another family member.
    • That portion of income of an MN or MI person or a person responsible for the MFBU, which is counted in determining the eligibility of a spouse, parent, or child as a public assistance (PA) or other PA recipient must be deducted.
    • Income of a stepparent and the value of income in-kind provided by a stepparent which is counted in determining the eligibility of a spouse or stepchildren as PA or other PA recipients must be deducted.

Note: This computation must also be done when one or more family members receives an SSI/SSP grant or IHSS. These individuals are not included in the MFBU, but the computation must be done to determine how much of the family's income was used to compute their SSI/SSP grant or IHSS eligibility. This amount of income is called an “Allocation to SSI/SSP or IHSS recipient” and is deducted from the nonexempt income of the MFBU. The actual computation is completed in CalSAWS.

Health Insurance Premiums 

Health insurance premiums are deducted if paid by and purchased for any family member.

Note: If the premium is paid less often than monthly it must be averaged on a monthly basis.

  • $66.00 premium paid quarterly
  • $66.00 / 3 = $22.00 per month is the allowable deduction.

Health insurance premiums paid for by a non-family member are not an allowable deduction; (i.e., absent parent).

Medicare Premium, Part B, must be deducted when actually paid by the client.

Allocation to Excluded Children

The rules for allocation income deduction to excluded children apply to any MC program.

This deduction is applied only when children who have separate income and/or property have been excluded from the MFBU.

The amount of the deduction is equivalent to the difference in the maintenance need with the children in or out of the MFBU, minus any income of the excluded child/children.

ExampleExampleThe family consists of a stepfather, his wife and wife’s two separate children. The family decides to exclude the eldest child from the MFBU because the child receives $100 gift from his natural father each month. If the maintenance need for 4 is $1,100 and $934 for 3 (excluding the eldest child). The difference ($166) less the child’s own income of $100 is equal to the child’s unmet need of $66, which is allowed as an “income allocation” deduction for the excluded child, towards the MFBU’s budget.

If the children have enough income to meet their own needs based on this computation there is no allocation.

Related Topics

Non-MAGI MC Income