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Division of Welfare and Supportive Services E-135.1 Medical Assistance Manual MAGI BUDGETING 22 Jul 01 MTL 03/22 Allowable Deductions Dependent Care Expense Employer provided dependent care benefits under a qualified plan may be excluded from wages. Self-employed individuals who receive benefits from a qualified dependent care benefit plan, are treated as both employer and employee. Not excluded from wages but a deduction on IRS Form 2441. Variable (up to IRS allowed maximum)

Income limits apply Health Flexible Spending Account (FSA) Employer provided Health FSA that qualifies as an accident or health plan. Salary reduction, and reimbursements of medical care expenses, in most cases, aren't included in income.

Note: Health FSAs are subject to a limit on salary reduction contributions for plan years beginning after 2012. As of 2021 the limit on employee contributions to health FSAs is $2,750/year. Health Insurance Premiums Premium payments for employer provided accident or health plan made by salary reduction aren't included in income. Variable Retirement Contributions Contributions to a qualified retirement plan made by salary reduction or paid by an employer. Employers can verify if the plan qualifies. Variable

Allowable annual deductions include but are not limited to:

• Schedule 1 of IRS Form 1040

Additional deductions may include but not limited to:

Deduction Type Explanation of Allowable Deduction Maximum Amount Charitable Contributions Up to allowable annual maximum. Up to $600/year. Student Loan Interest Deduction for interest paid on student loans. Loans must have been used for qualifying educational expenses while attending an educational institution. Principle payments are not deductible. The loan payments must be for the individual, their spouse, or their tax dependents (for tax filers) or their children in the household (for non-filers). The lesser of $2500/year or the actual interest paid if MAGI is less than $70,000 ($140,000 couples) Not available if MAGI is greater than $85,000 ($170,000 couples)