903 Income Deductions

Deductions shall be allowed only for the following household expenses: A. Standard Deduction Each household’s per month standard deduction is applicable to all households. See Basis of Issuance Chart for listing of standard deduction. The standard deduction will be deducted by the computer. B. Earned Income Deduction A percentage of gross earned income as defined in Section 901A. Earnings excluded in Section 902 shall not be included in gross earned income for purposes of computing the earned income deduction. The earned income deduction will be applied by the computer. C. Medical Deduction That portion of medical expenses in excess of $35 per month per household excluding special diets, incurred by any household member who is elderly or disabled as defined in the Glossary. These households are entitled to a standard medical deduction of $185. Households that incur out- of-pocket medical expenses of more than $185 monthly are entitled to a medical deduction for the actual amount of medical expenses in excess of $185. 1. A household member applying for disability benefits that would entitle the household to a medical deduction would not be entitled to the deduction; the individual must be receiving the disability check. 2. Spouses or other person receiving benefits as a dependent of the SSI, or disability and blindness recipients are not eligible to receive this deduction, but persons receiving emergency SSI benefits based on presumptive eligibility are eligible for this deduction. If the SSI presumptive eligibility check is stopped and the SSI application is denied, any medical expense allowed shall be removed according to regular processing standards. A household would continue to be eligible for an excess medical deduction for the medical expenses of a former member who is elderly or is disabled even after that person becomes hospitalized, institutionalized, or dies if the remaining household members are legally responsible for payment of the expenses. Allowable Medical Costs Are: 1. Medical and dental care including psychotherapy and rehabilitation services provided by a licensed practitioner authorized by State law or other qualified health professional. 2. Hospitalization or outpatient treatment, nursing care, and nursing home care including payments by the household for an individual who was a household member immediately prior to entering a hospital or nursing home provided by a facility recognized by the State. 3. Prescription drugs when prescribed by a licensed practitioner authorized under State law and other over-the-counter medication (including insulin) when approved by a licensed practitioner or other qualified health professional. 4. Costs of medical supplies, sick-room equipment (including rental) or other prescribed equipment are deductible. 5. Health and hospitalization insurance policy premiums are deductible. The costs of health and accident policies such as those payable in lump-sum settlements for death or dismemberment or income maintenance policies such as those that continue mortgage or loan payments while the beneficiary is disabled are not deductible. a) When a medical policy provides benefits for other household members who are not elderly or disabled as well as the elderly or disabled individual, the entire premium payment may not be allowed. If a portion of the premium can be assigned to the elderly or disabled member, use that portion. In the absence of specific information on how much of the premium is for the elderly or disabled member, proration may be used to determine the allowable amount. b) When the policy holder is not an elderly or disabled person, but the family policy includes such a household member, that portion of premium attributable to the eligible member may be used in figuring the allowable deduction. 6. Medicare premiums related to coverage under Title XVIII of the Social Security Act; any cost-sharing or spend down expenses incurred by Medicaid recipients. 7. Dentures, hearing aids, and prosthetics. 8. Securing and maintaining a service animal such as Seeing Eye dogs, hearing guide dogs and housekeeper monkeys trained to assist quadriplegics, including the cost of food and veterinarian bills. 9. Eye glasses (or contact lens) prescribed by a physician skilled in eye disease or by an optometrist. 10. Reasonable cost of transportation and lodging to obtain medical treatment or services. These costs are limited to those incurred in order to obtain such treatment. This includes not only trips to a doctor, dentist, etc. but also trips to a pharmacy or other locations to fill the prescriptions for medicine, dentures, a hearing aid, eye glasses, sick room equipment, etc. These costs are to be verified. Allowance for mileage in privately owned vehicles, other than actual verified costs shall be the State rate for mileage paid to State employees for mileage. 11. Maintaining an attendant, homemaker, home health aide, or child care services, housekeeper, necessary due to age, infirmity, or illness. (In order for the household to receive the medical deduction, the attendant, homemaker, etc. shall not be a household member. The attendant may be a relative.) In addition, an amount equal to the one person coupon allotment shall be deducted if the household furnishes the majority of the attendant’s meals. The allotment for this meal related deduction shall be that in effect at the time of initial certification. The county department is only required to update the allotment amount at the next scheduled recertification. If a household incurs attendant care costs that could qualify under the medical deduction and dependent care deduction, the county department shall treat the cost as a medical expense. Medical expenses billed through charge accounts (credit cards) are considered billed when the charge account statement is received. Charge account expenses, such as interest, would not be allowable as part of the medical expense. Households may receive a medical deduction for payments made on a loan when the loan is used to pay a onetime only medical expense provided a deduction has not been previously allowed for the expense. Loan expenses, such as interest, are not allowable as part of the medical expense. Non-Allowable Costs The following medical expenses, if paid by QMB (catastrophic) Medicaid, are not deductible medical expenses: 1. Medicare insurance premiums 2. Medicare deductibles this is the amount a Medicare recipient must incur before Medicare pays on an expense. 3. Medicare co-insurance this is the amount a Medicare recipient must pay in addition to the amount Medicare pays. Such payments by QMB are vendor payments, subject to the policies governing vendor payments as income. D. Dependent Care The dependent care deduction is allowed for payments incurred for the actual costs for the care of a child under the age of 18 as well as incapacitated persons of any age that are in need of dependent care when necessary for a household member to accept or continue employment, seek employment in compliance with the employment and program administered by the Department of Human Resources or the job search criteria (or an equivalent effort by those not subject to either) or attend training or pursue education which is preparatory to employment. The dependent care deduction will be the actual amount that households incur for this expense, including transportation and activity fees. Activity fees are fees that are associated with the care provided to the dependent that are necessary for the household to participate in the care. Although the fees do not have to be mandatory to be deductible, these fees must be specific and identifiable. Examples of activity fees that may be deductible include cost of art classes for an after school program or adult day care program, additional supply fees to attend a summer program or day care, or the cost of field trips sponsored by summer camps. The dependent care deduction, while allowed because of a dependent, is not the dependent’s deduction; it is a deduction allowed for the working member(s) of a household or those household members seeking employment. Therefore, a dependent care deduction may be allowed to a household when the dependent is not a member of that household. E. Child Support Deduction Legally obligated child support payments paid by a household member to a non-household member shall be allowed as a deduction. The deduction shall be only for the amount the household member actually pays, and shall not exceed the legally obligated amount. Voluntary child support payments are not allowed as a deduction. 1. The household may receive a deduction for legally obligated child support paid to a party outside the household, even if the child or the children and the other parent are in the same household with the individual paying the child support. For example this may occur if the child moves back and forth between the parents, or if the payee has a continuing obligation to make arrearage payments to the Child Support Collection Agency after the family is reunited. 2. Payments made to a third party (e.g., landlord or utility company) on behalf of the non- household member in accordance with the support order shall be included in the deduction. 3. Legally obligated payments made by the household to obtain medical care and health insurance for the child or children shall be included as part of the child support deduction. 4. In addition to the regular child support payments, a deduction may also be given for arrearage payments. If the amount in excess of the legally obligated amount is for arrearage the household is entitled to a deduction for the entire amount. For example a father (legally obligated to pay $100 per month child support) is paying $150 child support which includes $50 arrearage payments and the $100 current child support would be entitled to a deduction for the entire $150. However, if the amount in excess of the legally obligated amount is voluntary and is not for arrearage the household would only be entitled to a deduction for the legally obligated amount. A separate court order specifying the amount of the arrearage payments is not necessary in order for the household to receive the deduction. A court order or other types of verification of the legally obligated amount of child support is needed only for the current child support payments. The amount of the arrearage payments must be verified, as well as that the payments are truly arrearage. The worker must document thoroughly when giving a deduction for arrearage payments. 5. A deduction shall not be allowed for amounts collected through income tax intercepts. Unlike child support paid through garnishments from current income, child support collected through income tax intercept is taken from a lump-sum payment. F. Shelter Costs Monthly shelter costs in excess of 50% of the household’s income after all other deductions have been allowed up a maximum limit are the household’s shelter deduction except for households that contain an elderly or disabled person (as defined in the Glossary). Such households shall receive an excess shelter deduction for the monthly cost that exceeds 50% of the household’s monthly income after all other applicable deductions. If the elderly or disabled member is either hospitalized or institutionalized and is no longer a household member, the household would not qualify for an uncapped shelter deduction. The determination of the shelter expense is automated. Shelter Costs Shelter costs include only the following: 1. Continuing charges for the shelter occupied by the household, including rent, mortgage, condominium (condo) and association fees or other continuing charges leading to the ownership of the shelter such as loan repayments for the purchase of a mobile home, including interest on such payments. Payments on second mortgages and home equity loans are allowable shelter costs regardless of why the money was obtained or how it was used. 2. Property taxes, State and local assessments, and insurance on the structure itself, but not separate costs for insuring furniture or personal belongings. 3. The appropriate standard (SUA/BUA or telephone) for utility expenses. The household is entitled to the Standard Utility Allowance or the Basic Utility Allowance or the telephone standard. a) An expense paid on behalf of a household under a state law to provide energy assistance shall be considered an out-of-pocket expense incurred and paid by the household. b) One-time deposits shall not be included as shelter costs. c) Penalty fees for being late in making payments on utilities, mortgages and/or property taxes are not to be included as a shelter cost or part of a shelter cost. These penalties are not allowable as deductions for food assistance purposes. 4. Shelter costs for the home if temporarily unoccupied by the household because of employment or training away from home, illness, or abandonment caused by natural disaster or casualty loss. Shelter costs may be allowed for the unoccupied shelter if: a) The household intends to return to the home. b) The current occupant of the home, if any, must not be claiming the shelter cost for food stamp purposes. c) The home must not be leased or rented during the absence of the household. Only one standard can be claimed for both residences. A separate SUA/BUA or telephone standard cannot be claimed for each residence. 5. Charges for the repair of the home which was substantially damaged or destroyed due to a natural disaster such as a fire or flood. Shelter costs shall not include charges for repair of the home that have been or will be reimbursed by private or public relief agencies, insurance companies, or from any other source. 6. Shelter costs for two residences may be claimed when it is necessary for a household member to be away from home and occupy a second residence for part of the month due to employment or training or illness. Only the standard can be claimed for both residences. A separate standard cannot be claimed for each residence. G. Standard Utility Allowance 1. General Information The Standard Utility Allowance (SUA) is a standard amount to be budgeted monthly for utility expenses that include a heating or cooling component. The SUA is determined on an annual basis and any adjustment is handled as a mass change effective October 1. The SUA shall be made available only to households who incur heating and cooling costs separately and apart from their rent or mortgage. A cooling cost which entitles a household to the SUA is a utility expense relating to the operation of air conditioning systems or room air conditioners. These households include: a) Residents of rental housing who are billed on a monthly basis by their landlords for individual usage, or who are charged a flat rate separately from their rent. b) Recipients of direct or indirect energy assistance made under the Low Income Home Energy Assistance Act of 1981 even if these households incur no heating or cooling charges. This payment must be more than $20 and must be received in the current month or preceding 12 months. c) Recipients of direct or indirect energy assistance, other than LIHEAA, that is excluded as income if the expense exceeds the amount of the assistance. d) Recipients of direct or indirect energy assistance that is counted as income and incurs a heating or cooling expense. e) Recipients in public housing with shared meters that are charged for excess utility costs that include either a heating or cooling component. 2. Entitlement to the SUA A household which expects to incur a heating or cooling expense within the next 12 months will be allowed the SUA. Entitlement to the SUA may be verified in accordance with shelter and utility verification requirements. Verification is required at initial application, at recertification (even if no changes are reported), reported changes, and at the Six-Mont Report if a change in heating and cooling expenses is reported. a) If the household has moved and has not established a pattern of energy use, the worker will have to anticipate whether the household will incur a heating or cooling expense in the next 12 months. If the household has moved and has not established a pattern of energy use, the worker must verify that the household has the ability to incur heating or cooling costs that would entitle the household to the SUA. b) The SUA is not intended for households who incur infrequent and minimal expenses such as: ❖ A household which has no air conditioners, cuts its own firewood for heating, and only incurs the expense of gasoline for a chain saw and matches for lighting the fire. ❖ A household which has no air conditioners and which used only electric blankets for warmth. ❖ A household living in an apartment with no air conditioners, but with gas included in the rent payment, has electricity billed separately; while the household heats with gas, it runs a blower fan with electricity; this household is not entitled to the SUA. 3. When the Household Moves The SUA is allowed for the certification period; the household is only required to report a change in its shelter deduction when it moves. A move by any household using the SUA requires the county department to determine the household’s entitlement to the SUA at the new address. Shelter and utility expenses must be verified at the time of the reported move in accordance with shelter and utility verification requirements. a) A household loses entitlement to the SUA when it moves and stops incurring separate heating and cooling costs. When the county department becomes aware of such a change, it should take appropriate action, considering the applicable notice requirements, to remove the standard utility allowance from the household’s net income computation, or change the standard, as appropriate, if the household establishes entitlement to the BUA or telephone standard. b) When a household who was not entitled to SUA reports a move, the county department is required to determine if the household would be entitled to the SUA at their new address. 4. The SUA and Sharing Expense When utility expenses are shared among different households living together in one residence, each household is entitled to receive the full SUA if the residence has qualifying heating or cooling costs. All households are not required to be participating in food assistance program for this purpose. 5. Low Income Home Energy Assistance Act Payments (LIHEAA) and the SUA A household whose shelter arrangement does not change and who receives at least one LIHEAA payment will keep its entitlement to the SUA for a full year, the same as a household that incurs heating or cooling costs on a regular basis. If a household moves and receives a LIHEAA payment at the new address, it would continue to be eligible for the SUA. However, if it moves and its circumstances are such that it receives neither a LIHEAA payment nor incur out-of-pocket heating or cooling costs it will not receive the SUA. H. Basic Utility Allowance 1. General Information The Basic Utility Allowance (BUA) is a standard utility amount to be budgeted monthly for households who incur utility expenses other than or in addition to a telephone expense, but not separate heating or cooling costs or LIHEAA payments. 2. Entitlement to the BUA To qualify for the BUA a household must be billed for at least two utility expenses separate and apart from their rent or mortgage. Qualifying expenses include: electricity, fuel for purposes other than heating or cooling, water, telephone, sewerage, garbage or trash collection, installation and maintenance of a septic tank or a well, or an excess utility cost that does not include heating or cooling for households who live in public housing or other similar rental units. Utility expenses used to establish entitlement to the BUA must be verified at initial application, recertification, and at reported changes. If a change in utilities is reported on the Six-Month Report, verification is required. 3. The BUA and Sharing Expense When utility expenses are shared among different households living together in one residence each household is entitled to receive the full BUA if the residence has qualifying costs. All households are not required to be participating in the food assistance program for this purpose. I. Telephone Standard If a household only incurs the cost of a telephone (may be a cell phone), they will only be entitled to the telephone standard not the Basic Utility Allowance (BUA). Telephone expenses must be verified at initial application, recertification, and at reported changes in accordance with shelter and utility verification requirements. If a change in utilities is reported on the Six-Month Report, verification is required. J. Actual Utility Expense Households incurring only one utility expense other than a telephone or a heating or cooling expense are not entitled to receive a utility standard. These households will be given that utility expense as a deduction based on an average of the actual expenses incurred and anticipated for the certification period. In this situation, counties are encouraged to contact the State Policy Desk for assistance in determining the deduction. Actual utility expenses must be verified at initial application, re-verified at recertification, and at reported changes. K. Homeless Shelter Deduction Households in which all members are homeless are entitled to the Homeless Shelter Deduction (HSD). The Homeless Shelter Deduction may be updated annually when the shelter cap is adjusted by the Food and Nutrition Service (FNS). Homeless households receiving free housing and utilities throughout the month are not eligible for the HSD. If the only utility expense incurred by a homeless household is the telephone expense, the household is only entitled to the Telephone Standard. The telephone expense must be verified to allow a deduction. The Homeless Shelter Deduction includes both rent and utilities. Homeless households that state that they incur shelter costs during the month, regardless of whether such cost are incurred for at least one day during the month or for the entire month and homeless households that reasonably expect to incur a shelter cost during the month may be eligible for the HSD. When the HSD is used, the household is not entitled to any additional shelter deduction. The shelter costs must be verified to allow the HSD. Households claiming shelter expenses greater than the HSD which would entitle them to the SUA or BUA, shall be allowed the SUA or BUA, if eligible, plus any rent billed. The Eligibility Worker must explain that it is the household’s choice to use the HSD or the actual shelter expense and SUA or BUA. The shelter expenses must be verified to allow the HSD, SUA or BUA deduction. The HSD cannot be claimed unless the household meets the definition of homeless. Homeless A homeless individual is one who: 1. Lacks a fixed and regular nighttime address; or 2. Has a primary nighttime address that is: a. A supervised publicly or privately operated shelter designed to provide temporary living accommodations; or b. An institution that provides a temporary residence for individuals intended to be institutionalized; or c. A temporary accommodation in the residence of another individual for no longer than 90 days; or d. A public or private place not designed for, or ordinarily used as, a regular sleeping accommodation (For example: the street, a bus station, a lobby, a car, an abandoned building or any similar place).