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West Virginia Income Maintenance Manual Chapter 4

West Virginia Income Maintenance Manual Page 155 Chapter 4 Income

Deduction Type Examples Deduction Methodology Annualized deduction • Net operating loss carryover • Deductible part of self- employment tax • Divide the total projected expense by 12 and deduct that amount from current monthly income. The following items are subtracted from the individual’s income: • Educator expenses • Certain business expenses of reservists, performing artists, and fee-basis government officials • Health savings account deductions • Moving expenses (Only for active duty members of the military who are ordered to move or change duty station). • Deductible part of self-employment tax • Self-employed Simplified Employee Pension (SEP), Savings Incentive Match Plan for Employees (SIMPLE), and qualified plans • Self-employed health insurance deductions • Penalty on early withdrawal of savings • Alimony paid ONLY if the alimony agreements are finalized prior to January 2019. Any pre-existing agreements modified after December 31, 2018 are not deductible. • IRA deductions • Student loan interest deductions Example 1: Mr. Oak, an elementary school teacher, has one tax dependent child, Hazel. He spends $240 on supplies for his classroom in August. That same month, Mr. Oak applies for Medicaid for Hazel. Hazel’s MAGI-based household will include herself and her father, Mr. Oak. Because it is an educator expense, Mr. Oak can choose to annualize the expense or use it as a lump-sum deduction. To annualize the deduction, first divide the expense by 12 (240 divided by 12 = $20). Then, subtract the $20 from Hazel’s household income for the month of August. Example 2: Same situation as above, except Mr. Oak chooses to use a lump- sum deduction for his $240 educator expense. To calculate the lump-sum deduction, subtract the total amount of the expense ($240) from Hazel’s MAGI- NOTE: The adjustments/deductions are capped at the same amount set by the IRS.