Revision 18-2; Effective June 1, 2018

 

 

E-3100 Types of Earned Income

Revision 13-2; Effective June 1, 2013

 

Earned income may be in cash or in-kind. Payment of earned income may be:

  • wages,
  • net earnings from self-employment,
  • farm income,
  • payments for services performed in a sheltered workshop or work activities center,
  • certain royalties and honoraria, or
  • certain refunds of federal income taxes and advance payments by employers made in accordance with the earned income credit provisions of the Internal Revenue Code.

To budget variable earned income:

  • determine an average pay amount,
  • convert income to a monthly amount, and
  • project income for future months if anticipated to continue.

Converting Monthly Income

The eligibility system will convert income that is received other than monthly to a monthly amount by using the following conversion process below:

  • Divide yearly income by 12.
  • Multiply weekly income by 4.33.
  • Add amounts received twice a month (semi-monthly).
  • Multiply amounts received every other week by 2.17 (bi-weekly).

Weekly earnings are converted to monthly amounts by multiplying weekly earnings by 4.33. For example, if weekly earnings are $150, the calculation is: $150 weekly earnings X 4.33 = $649.50 monthly earnings.

Bi-weekly earnings are converted to a monthly amount by averaging the bi-weekly earnings, then multiplying the average bi-weekly earnings by 2.17. For example, if average bi-weekly earnings are $300, the calculation is: $300 average bi-weekly earnings X 2.17 = $651 monthly earnings.

When projecting earned income, if there is verification of the actual amount of earnings received during an entire calendar month, use the actual amount received instead of the above procedures for converting weekly and bi-weekly earnings to a monthly amount. For example, the client earns $150 each week. During July, he received the following payments: $150 on July 1, $150 on July 8, $150 on July 15, $150 on July 22, and $150 on July 29. The amount budgeted is the actual income received in July ($750), not $649.50 ($150 weekly earnings X 4.33 = $649.50). $649.50 would be used as the projected income for following months beginning in August.

Note: When income is new or terminated and only a partial month's income is received in the start or terminated month, do not convert the income. Use actual, unconverted income.

 

E-3110 Wages

Revision 10-2; Effective June 1, 2010

 

Wages are what a person receives (before any deductions) for working as someone else's employee.

Wages include salaries, commissions, bonuses, severance pay and any other special payments received because of employment. They may also include the value of food, clothing or shelter, or other items provided instead of cash, referred to as in-kind earned income.

If a person is a domestic or agricultural worker, the law requires the value of food, clothing or shelter, or other items provided instead of cash, be treated as in-kind unearned income.

Note: If a person receives wages from an S Corporation and is also a shareholder of the S Corporation, consult the regional attorney.

Wages or Self-Employment

Under certain conditions, services performed as an employee may be considered self-employment rather than wages. Typically, services provided by ministers, real estate agents or newspaper vendors are considered self-employment rather than wages. Statutory employees are independent contractors and are treated as self-employed individuals. There are four categories of statutory employees:

  • agent drivers or commission drivers;
  • certain full-time life insurance salespeople;
  • full-time traveling or city salespeople; and
  • home workers.

Kinds of Wages

Some, but not all, forms of wages are:

Salaries — Payments (fixed or hourly rate) received for work performed for an employer.

Commissions — Fees paid to an employee for performing a service (for example, a percentage of sales). Commissions are wages when paid if the payment stems from an employer-employee relationship. The wages of a salesperson paid on a straight commission basis are the gross commissions paid minus any amounts paid specifically as advances or reimbursements for travel or business expenses incurred in the employer's business. Advances against commissions to be earned in the future are wages when paid.

Bonuses — Amounts paid by employers as extra pay for past employment (for example, for outstanding work, length of service, holidays, etc.) as part of the employment relationship.

Severance Pay — Payment made by an employer to an employee whose employment is terminated independently of his wishes or payment is made due to voluntary early retirement and normally considered earned wages. When an employee’s severance pay is budgeted, contact state office for special treatment of some severance pay.

Military Basic Pay — The service member's wage, which is based solely on the member's pay grade and length of service. When military personnel wages are budgeted, contact state office for special treatment of the service member’s compensation.

Special Payments Received Because of Employment —Items such as vacation pay, advanced/deferred wages, etc. Payments are not wages after the first six months. Any payments, or portion thereof, received by an employee during the first six months period, which according to the employer, are attributable to the employee's own contributions to the plan are not wages. Such payments are a return on the employee's premium rather than pay for service.

Note: Workers' compensation payments are not wages.

References:

 

E-3120 Self-Employment

Revision 10-1; Effective March 1, 2010

 

Net earnings from self-employment are the gross income from any trade or business that a person operates, less allowable deductions for that trade or business. Net earnings also include a person’s share of profit or loss in any partnership to which a person belongs. These are the same net earnings that a person would report on a federal income tax return.

If a person is both employed and self-employed, his earned income consists of his wages plus net earnings from self-employment. Typically, services provided by ministers, real estate agents or newspaper vendors are considered self-employment rather than wages. Statutory employees are independent contractors and are treated as self-employed individuals. There are four categories of statutory employees:

  • agent drivers or commission drivers;
  • certain full-time life insurance salespeople;
  • full-time traveling or city salespeople; and
  • home workers.

See Section E-6000, Self-Employment Income, for more details on treatment of this type of earned income.

 

E-3130 Farm Income

Revision 09-4; Effective December 1, 2009

 

Farm income is earned income when either the person or spouse is doing the farming or operating the farm as a business. See Section E-6000, Self-Employment Income, for more details on treatment of this type of earned income.

 

E-3140 Certain Payments in a Sheltered Workshop

Revision 09-4; Effective December 1, 2009

 

Payments for services performed in a sheltered workshop or work activities center are what a person receives for participating in a program designed to help a person become self-supporting, even though payment does not meet the definition of wages.

 

E-3150 Certain Royalties and Honoraria

 

Revision 09-4; Effective December 1, 2009

 

Royalties that are earned income are payments to a person in connection with any publication of the person’s work. Honoraria that are earned income are those portions of payments, such as an honorary payment, reward or donation, received in consideration of services rendered for which no payment can be enforced by law.

If a person receives a royalty as part of a trade or business, see Section E-3120, Self-Employment. See Section E-6000, Self-Employment Income, for more details on treatment of this type of earned income.

If a person receives another type of royalty or honorarium, investigate unearned income policy.

 

E-3160 Certain Federal Income Tax Refunds

Revision 09-4; Effective December 1, 2009

 

Refunds on account of earned income credits are payments made to a person under the provisions of Section 43 of the Internal Revenue Code of 1954, as amended. These refunds may be greater than taxes a person has paid. A person may receive earned income tax credit payments along with any other federal income tax refund a person receives because of overpayment of the person’s income tax. Advance payments of earned income tax credits are made by the employer under the provisions of Section 3507 of the same code. A person can receive earned income tax credit payments only if a person meets certain requirements of family composition and income limits.

Federal income tax refunds made on the basis of taxes a person has already paid are not income to a person, as stated in Section E-1740, Miscellaneous Things That May Not Be Income.

 

E-3170 Census Bureau Wages

Revision 10-1; Effective March 1, 2010

 

The census is a count of everyone living in the United States and is mandated by the U.S. Constitution. The U.S. Census Bureau conducts the census every 10 years.

Wages paid by the Census Bureau for temporary employment related to census activities are excluded income for the Medicare Savings Programs (MSP). Do not include these wages in the eligibility budget for MSP.

These wages for temporary employment are not countable income in the month of receipt, but are considered a resource thereafter.

Wages paid by the Census Bureau for temporary employment related to census activities are included in eligibility or co-payment budgets for any other Medicaid for the Elderly and People with Disabilities (MEPD) program that is not an MSP.

For cases with a combination of regular Medicaid benefits and an MSP, the wages are countable in the eligibility budget (and co-payment, if applicable) for the regular Medicaid program, but are excluded in the eligibility budget for MSP.

Example: Individual is being considered for Pickle with Qualified Medicare Beneficiary (QMB) benefits. The wages paid by the Census Bureau for temporary employment related to census activities are included in the eligibility budget for Pickle, but are excluded in the eligibility budget for QMB.

 

E-3200 Types of Unearned Income

Revision 16-2; Effective June 1, 2016

 

Unearned income is any income that is not earned. Unearned income may be in cash or in-kind. Unearned income includes these types of income:

  • In-kind
  • Fixed
  • Other

Income tax refunds are subject to restitution policy (in the month of receipt) for co-payment purposes, to the extent that withholding tax was not included in the co-payment budget.

To determine the amount of unearned income, consider the amount actually available to the person. Reduce the gross amount by any ordinary or necessary expenses incurred in receiving the unearned income. For example, compensation for damages incurred in an accident would be the settlement amount less any legal, medical or other expenses. Medicare premiums, other health insurance premiums and income tax withheld from unearned income are not deductible expenses for eligibility determination. Income tax withheld from unearned income is also not a deductible expense for the co-payment calculation.

 

E-3300 Sources of Unearned Income

Revision 09-4; Effective December 1, 2009

 

This section includes sources of unearned income.

 

E-3310 Annuities, Pensions and Other Periodic Payments

Revision 09-4; Effective December 1, 2009

 

This unearned income is usually related to prior work or service. It includes, for example, private pensions, Social Security benefits, disability benefits, veterans’ benefits, workers’ compensation, railroad retirement annuities and unemployment insurance benefits. Payments from these sources are usually stable and fixed. See Section E-4000, Fixed Income.

 

E-3311 Medicaid Qualifying Trust Payments

Revision 09-4; Effective December 1, 2009

 

A Medicaid-qualifying trust is one that the person, his spouse, guardian or anyone holding his power of attorney establishes using the person's money, and the person is the beneficiary.

Amounts distributed from the trust to the person or used for the person's health, personal or other maintenance needs are countable income.

For example, if terms of the trust direct the trustee to pay a health care provider for medical services, the person is receiving the benefit of payment although no money is paid directly to him, and the amount is countable income.

 

E-3312 Testamentary and Inter Vivos Trusts Payments

Revision 09-4; Effective December 1, 2009

 

Resources in a testamentary or inter vivos trust are countable if the person is the trustee and has the legal right to revoke the trust and use the money for his own benefit. If he does not have access to the trust, the trust is not counted as a resource. If a trust is not counted as a resource, payments or disbursements from the trust made to or on behalf of the person are considered income. Payments or disbursements used to purchase medical or social services for the person are not considered income to the person.

 

E-3313 Revocable and Irrevocable Trusts

Revision 09-4; Effective December 1, 2009

 

Payments from the corpus or income generated by the corpus, to or for the benefit of the person, excluding payments for medical/social services, are income.

Payments from the corpus or income generated by the corpus for any other purpose are a transfer of assets.

 

E-3314 Exception, Special Needs and Pooled Trust

Revision 09-4; Effective December 1, 2009

 

Any distribution to or for the benefit of the person from corpus or income generated by the trust, except payments for medical and social services, is countable income. A payment to or for the benefit of the person is counted under trust provisions only if such payment is ordinarily counted as income.

 

E-3315 Qualified Income Trust (QIT)

Revision 10-1; Effective March 1, 2010

 

Income directed to the trust is disregarded from countable income when testing eligibility for institutional settings.

Any source of non-exempt/non-excludable income which is not directed to the QIT account during the calendar month of receipt is countable income for that month.

If countable income exceeds the special income limit, the person is income-ineligible for the month. Applicants may not be certified for any calendar month(s) in which they are income-ineligible. For active persons, restitution is requested in the amount of the vendor payment for any calendar month(s) in which they are income-ineligible.

Notes:

  • When a person does not pay a full month's co-payment because of hospitalization or because Medicare covered 100 percent of the cost of a partial month, the accumulated funds in the QIT trust are not a countable resource, and transfer of assets is not involved.
  • A person receiving Home and Community-Based Services waiver services with a QIT covering all waiver costs is not denied. Most waiver programs are based on a waiver for the institutional program. In a waiver program, the applicant with a QIT is receiving the benefit of the contracted rates as opposed to the private rates.

Examples:

  • The applicant entered the nursing facility and applied for Medicaid in July. Income totals $4,600. The QIT calls for all income to be directed to the trust account. However, the trustee did not deposit the July income checks to the trust account until Aug. 2. The entire $4,600 is countable income for July, and the applicant is ineligible for that month.
  • The person was certified for Medicaid in September. The QIT calls for all income (totaling $4,600) to be directed to the trust account. During the redetermination in August, the eligibility specialist learns that income checks for June were not deposited to the trust account until July. Because the person was ineligible for June, the eligibility specialist requests restitution for that month in the amount of the co-payment.

 

E-3320 Alimony and Support Payments

Revision 16-4; Effective December 1, 2016

 

Alimony and spousal support payments are cash or in-kind contributions to meet some or all of an individual's needs for food or shelter. Alimony (sometimes called maintenance) is an allowance made by a court from the funds of one spouse to the other spouse in connection with a suit for separation or divorce. Support payments may be made voluntarily or because of a court order.

Alimony and spousal support payments are unearned income to the individual receiving the payments. Verify the amount and frequency of alimony or spousal support payments.

For verification, use one of the following sources:

  • court records;
  • records of the agency through which the payments are made;
  • official documents in the individual's possession (e.g., legal documents) that establish the amount and frequency of the support; or
  • report of contact with the source of the payment containing the amount and frequency of the alimony or spousal support.

If none of the above sources are available, obtain an individual’s sworn affidavit that explains why one of the sources above is not available (for example, the documentation does not exist, the court or agency will not release the information, or the source refused to cooperate). See E-1410 , Division of Marital Income and Property.

If the alimony is not received in cash, determine its current fair market value.

To determine countable income, deduct any expenses that may have been incurred in obtaining the income, such as legal fees and court costs.

Determine whether the alimony is to be treated as a lump-sum payment, infrequent or irregular income, or regular and predictable income.

 

E-3321 Child Support Payments

Revision 13-2; Effective June 1, 2013

 

Consider payments as child support if:

  • a court ordered the support, or
  • the child's parent or the person making the payment states the purpose of the payment is to support the child.

Consider cash gifts or donations as cash contributions, not child support. A cash gift or donation is money that only benefits the child for a specific purpose, such as a birthday present, or to purchase clothes, toys or personal items.

Child support collected through the Office of Attorney General (OAG) may be distributed through warrants, direct deposits or the Texas Debit Card. A person also may receive payments through another state’s Office of Attorney General. Several other states use debit accounts for the distribution of child support payments.

When child meets definition in D-1210, Definition of a Child:

  • Child support payments (including arrearage payments) made on behalf of the child are unearned income to the child when the payment is made available to the child. One-third of the amount of a child support payment made to or for an eligible child by an absent parent is excluded. (See E-2350, Child Support Payments, for more information.)

When child does not meet definition in D-1210:

  • Child support payments (excluding arrearages) made on behalf of the child are income to the child whether or not the child lives with the parent or receives any of the child support payment from the parent. Such support payments are not subject to the one-third reduction.
  • Child support arrearage payments the parent receives and does not give to the adult child are income to the parent. Any amount of the payment the parent gives to the adult child is income to the adult child in the month given, not income to the parent. The one-third child support exclusion does not apply.

If a recipient receives child support for a child (including an adult child) but uses the money for the recipient’s personal or household needs instead of the child’s, count it as unearned income to the recipient. Do not count the amount actually used for or provided to the child as income to the recipient.

The eligibility specialist must document how the child support monies are used.

If a single payment covers two or more children (including at least one who is not an applicant/recipient) and the support order does not specify a portion for each child, prorate the payment among all of the children. When two or more children receive child support from the same father and one is an eligible child, the payment is always prorated.

 

E-3330 Dividends, Interest and Royalties

Revision 09-4; Effective December 1, 2009

 

Dividends and interest are returns on capital investments, such as stocks, bonds or savings accounts.

Royalties include compensation paid to the owner for the use of property, usually copyrighted material such as books, music or art, or natural resources such as minerals, oil, gravel or timber. Royalty compensation may be expressed as a percentage of receipts from using the property or as an amount per unit produced.

To be considered royalties, payments for the use of natural resources also must be received:

  • under a formal or informal agreement whereby the owner authorizes another person to manage and extract a product (for example, timber or oil); and
  • in an amount that is dependent on the amount of the product actually extracted.

An outright sale of natural resources by the owner of the land or by the owner of rights to use of the land constitutes the conversion of a resource. Proceeds from the conversion of a resource are not income.

Royalties are unearned income unless they are:

  • received as part of a trade or business, or
  • received by a person in connection with any publication of the person's work (for example, from publication of a manuscript, magazine article or artwork).

If royalties are earned income, see Section E-3150, Certain Royalties and Honoraria.

 

E-3331 Interest and Dividends

Revision 10-1; Effective March 1, 2010

 

Interest and dividends are returns on loans or investments such as stocks, bonds or savings accounts.

Dividends from insurance policies are not included because those dividends are refunds of overcharges on premiums. Appendix XXXV, Treatment of Insurance Dividends, indicates that when dividends are:

  • paid directly to the policy holder, disregard dividends when paid. Count the dividend(s) as a resource if retained after the month of receipt;
  • applied to future premium payments, disregard dividends as income or a resource;
  • used to purchase term insurance, disregard dividends as income or a resource. Term insurance is not a resource per Section F-4226, Term and Burial Insurance; and
  • accumulating in a separate account, count accumulated dividends as a resource, regardless of face value. Treat as a savings account, both as a resource and as income for interest generated.

Note: The dividend accumulation is a countable resource, like the balance of a savings account. The interest earned on the dividends would be excluded from income when paid. Interest left to accumulate becomes part of the countable resources.

References:

 

E-3331.1 Treatment of Interest/Dividends on Fully Countable Resources

Revision 09-4; Effective December 1, 2009

 

Determine if any interest or dividends are accrued on fully countable resources.

  • Do not count the interest or dividends as income in the eligibility budget regardless of the amount or frequency.
  • Count the interest or dividends as income in the co-payment budget.

Examples:

  • An individual owns an excluded whole life participating insurance policy with a total face value of $1,500. Since this is a participating policy, the policy is accumulating dividends. The accumulating dividends are countable. Like a savings account, the accumulating dividends are accruing interest. Since the accumulating dividends are countable, do not count the interest income from the accumulating dividends in the eligibility budget.
  • An individual owns a savings account with a balance of $800. The savings account is a fully countable resource. The savings account is accruing interest quarterly. Since the saving account is countable, do not count the interest income from the savings account in the eligibility budget.

 

E-3331.2 Treatment of Interest/Dividends on Certain Excluded or Partially Excluded Resources

Revision 16-4; Effective December 1, 2016

 

Determine if any interest or dividends are accrued on certain excluded or partially excluded resources.

  • Do not count the interest or dividends as income in the eligibility budget or co-payment budget if from one of the following sources.

The following are excluded or partially excluded resources based on federal statutes other than the Social Security Act:

  • Agent Orange Settlement Funds;
  • Nazi Persecution, including Austrian Social Insurance Funds and Netherlands WUV Payments to Victims of Persecution;
  • Corporation for National and Community Service (CNCS) (formerly ACTION) Programs;
  • Restricted Allotted Indian Lands;
  • Individual Development Accounts (IDAs) – TANF Funded;
  • IDAs – Demonstration Project;
  • Japanese-American and Aleutian Restitution Funds;
  • Low Income Energy Assistance;
  • Department of Defense (DOD) Payments to Certain Persons Captured and Interned by North Vietnam;
  • Radiation Exposure Compensation Trust Funds;
  • Ricky Ray Hemophilia Relief Fund;
  • Payments to Veterans' Children with Certain Birth Defects; and
  • Achieving a Better Life Experience (ABLE) Account.

See Section E-2000, Exempt Income, for other sources and for treatment of interest or dividends accrued on other unspent types of payments.

Example: An individual in a nursing facility received a payment for being a former prisoner of North Vietnam. The payment made by the Department of Defense is not a countable resource. The payment was deposited into an account that accrues interest. Do not count interest accrued on the unspent portion from the payment in the eligibility or co-payment budgets.

 

E-3331.3 Treatment of Interest/Dividends on All Other Resources

Revision 09-4; Effective December 1, 2009

 

Determine if any interest or dividends are accrued on all other resources.

  • Count the interest or dividends accrued according to the treatment of that particular resource as outlined in the handbook as income in the eligibility budget.
  • Count the interest or dividends accrued according to the treatment of that particular resource as outlined in the handbook as income in the co-payment budget.

Examples:

Interest accrued on retained amounts of SSA/SSI lump sums during the nine-month resource exclusion period is not excluded as income. However, some or all of the amount earned may be excluded as infrequent or irregular income.

Burial funds — Continue to follow policy for burial funds in Chapter F, Resources, in all aspects of calculating countable resources and consideration of the interest accrued.

Steps to follow:

When the source of the dividend or interest is received on ... then ...
a fully countable resource, the dividends or interest are not counted as income regardless of the frequency and amount in the eligibility budget. Count in the co-payment budgets.
certain excluded or partially excluded resource, the dividends or interest are not counted as income in either the eligibility or co-payment budgets.
all other resources (different than those above), the dividends or interest are counted as income in the eligibility or co-payment budgets according to the treatment of that particular resource as outlined in the handbook.

Exclude interest and dividends if they meet the definition of infrequent or irregular income as specified in Section E-9000, Infrequent or Irregular Income.

See Appendix XVI, Documentation and Verification Guide.

Note: In a spousal situation, if the institutionalized person is diverting income to the community spouse, a joint bank account balance is equally divided between the two. Even though only one-half of this balance is countable for the institutionalized person, treat the interest/dividends as if accrued on a fully countable resource.

 

E-3331.4 Treatment of Interest and Dividends Earned on an Achieving a Better Life Experience (ABLE) Account

Revision 16-4; Effective December 1, 2016

 

An Achieving a Better Life Experience (ABLE) program allows an individual with a disability or family members of the individual to establish a tax-free savings account to maintain health, independence and quality of life for the benefit of the individual with a disability. The individual must meet the criteria of the state's ABLE program in which the individual enrolls. The ABLE account funds can be used for the individual's disability-related expenses, which supplement, but do not replace, private insurance and/or public assistance.

Interest and dividends earned on an ABLE account are not countable income to the designated beneficiary.

Income of the designated beneficiary of an ABLE account, or an individual whose income is counted when determining eligibility, that is deposited into an ABLE account, remains countable when determining eligibility.

Contributions to an ABLE account from individuals other than the designated beneficiary, and any distributions from an ABLE account, are not considered income to the designated beneficiary.

Request information to verify an ABLE account. Verification must include the following information:

  • name of the designated beneficiary;
  • state ABLE program administering the account;
  • name of the person who has signature authority (if different from the designated beneficiary);
  • name of the financial institution; and
  • ABLE account number.

Verification documents may vary among states. Examples of acceptable documentation include participation agreements, ABLE account contracts, financial statements, and annual income tax filing documents.

 

E-3331.5 Treatment of Interest/Dividends on School-Based Savings Accounts

Revision 16-4; Effective December 1, 2016

 

School-Based Savings Accounts are accounts set up by students or their parents at financial institutions that partner with school districts. Individuals may set up school-based savings programs through savings accounts, Certificates of Deposit (CDs), Series I savings bonds, and Tuition Savings Plans under IRS Code, Section 529 or U.S.C. Section 530.

Interest earned on School-Based Savings Accounts is excluded from income.

Related Policy

F-2320, School-Based Savings Accounts

 

E-3332 Income from Joint Bank Accounts

Revision 10-1; Effective March 1, 2010

 

In this context, the term "spouse" includes a spouse whose income is considered in the co-payment determination process. Interest payments on joint bank accounts are considered as follows:

  • If the co-holders of the account are not eligible for SSI, TANF or MAO, or do not have spouses or parents whose incomes are deemed to the applicant/recipient, all interest payments and deposits made by the ineligible co-holders are considered as income of the applicant/recipient.
  • If one or more co-holders are eligible for TANF, SSI or MAO, or are spouses or parents whose incomes are deemed to the applicant/recipient, a deposit by the co-holder, spouse or parent is not considered to be income to the applicant/recipient.

All interest payments and deposits are divided equally among the applicant/recipient, spouse or parent.

If an applicant/recipient has disproved ownership of all or a part of the funds in a joint account, deposits by co-holders are not considered as income before the change in the account designation. Interest payments are income to the eligible individual in proportion to the amount of the funds owned.

References:

Section F-4121, Joint Bank Accounts
Section E-3331, Interest and Dividends

Determine ownership by verifying bank records and obtaining statements from the co-holders of the account.

 

E-3333 Mineral and Timber Rights

Revision 09-4; Effective December 1, 2009

 

Ownership of Land and Mineral/Timber Rights

If the person owns the land to which the mineral rights or timber rights pertain, the current market value of the land can be assumed to include the value of the mineral rights. Additional development is unnecessary.

Ownership of Mineral Rights/Timber Rights Only

If the person does not own the land to which the mineral rights pertain, obtain a current market value estimate from a knowledgeable source.

Some documents concerning royalty payments will provide both a gross and a net payment amount. When the difference between the gross and the net figures is due to income taxes withheld or windfall profit tax deductions, use the gross figure when determining income.

When the difference between the gross and net figures represents a production or severance tax (most oil royalties will be reduced by this tax), use the net figure when determining income. The production or severance tax is a cost of producing the income and, therefore, is deducted from the gross income.

Document location/address of property in the case comments section. Document percentage of interest owned in case comments; the accessibility to interest in land resources; and whether land resources are excluded as a resource.

Document calculation of countable equity value in case comments if not excluded.

Notes:

  • Clearance of value is not required for subsequent reviews unless circumstances that may change countability or value occur.
  • If the mineral rights are non-producing, a $100 "default value" should be assigned. Document reason for $100 default value in case comments.
  • If eligibility is negatively impacted by the "default value," a specific value must be verified.

Sources for verifying the value of land resources:

  • Tax statement, if assessed.
  • Contact a knowledgeable source in the community using telephone contact documentation. (Sources include oil and gas producers, tax assessors/collectors and petroleum lease agents – land men.)
  • Form H1242, Verification of Mineral Rights, completed by an authorized employee of the producing company.
  • IRS formula of 40 times the average monthly payout in assessing the value of mineral rights for inheritance purposes (to be used only when no other source is available). In TIERS, use "other acceptable" and document information in case comments.

Sources to verify ownership include:

  • Copies of deeds, wills or leases. If the terms of the deeds, wills or leases are difficult to understand, obtain the assistance of legal staff.
  • Copy of royalty statement.
  • Division order, if producing.
  • Statement from the person about amount of interest (ownership).
  • Completed Form H1242.

Conversion of a resource from the sale of timber is not considered income except when:

  • The owner leases the land or resource rights. The income received from the lease is unearned income.
  • The sale of the natural resource is part of the person's trade or business. The income received is self-employment income.

Some documents concerning royalty payments will provide both a gross and a net payment amount. When the difference between the gross and the net figures is due to income taxes withheld or windfall profit tax deductions, use the gross figure when determining income.

Note: Consider whether royalty payments are excludable as irregular and/or infrequent income. See Section E-5000, Variable Income.

 

E-3333.1 Indian Fishing Rights

Revision 09-4; Effective December 1, 2009

 

In accordance with Public Law 100-647, effective Nov. 10, 1988, income received by a member of an Indian tribe from the exercise of recognized fishing rights is treated as unearned income for SSI and Medicaid purposes. Fishing rights must have been secured as of March 17, 1988, by a treaty, Executive Order or Act of Congress.

 

E-3340 Rents

Revision 09-4; Effective December 1, 2009

 

Rents are payments a person receives for the use of real or personal property such as land, housing or machinery. Ordinary and necessary expenses in the same taxable year are deducted from rental payments. These include only those expenses necessary for the production or collection of the rental income and they must be deducted when paid, not when they are incurred. Some examples of deductible expenses are interest on debts, state and local taxes on real and personal property and on motor fuels, general sales taxes, and expenses of managing or maintaining the property.

Records for the IRS can be used. However, depreciation or depletion of property is not considered a deductible expense.

Rent is payment, either as cash or in-kind, which a person receives for the use of real or personal property, such as land, housing or machinery. Rental income is considered unearned income unless it is derived from self-employment, that is, someone is in the business of renting properties.

Net rental income (gross rent less expenses incurred in the production/collection of the income) is used in budgeting. Expenses are deducted from the month in which they were paid, regardless of when they were incurred. Rental deposits are not considered to be income while subject to return to the tenant; they become income to the landlord at the time of use.

 

E-3341 Rental Income Paid to a Third Party

Revision 09-4; Effective December 1, 2009

 

If the rental agreement is between the authorized representative and the tenant, and the authorized representative provides a statement to the effect that he does not and will not make the payments available to the person, the rental payments are not considered to be the person's income.

A referral to Adult Protective Services (APS) may be appropriate.

However, if the authorized representative is the person's guardian or power of attorney (POA), the payments are countable income to the person, unless extenuating circumstances indicate otherwise.

If the rental agreement is between the person and the tenant, the payments are income to the person, regardless of whether the authorized representative is make them available.

If the authorized representative is not making the rental payments available to the person, a referral to APS may be appropriate.

 

E-3342 Mortgage Payment Made by Third Party

Revision 09-4; Effective December 1, 2009

 

If the person's homestead is vacant and a third party is making the person's mortgage payments using his (the third party's) own funds, these payments are not income to the person.

If the person's home is rented and the lease agreement specifies that the tenant pays the person's mortgage company in lieu of rent, these payments are countable income to the person and are treated as rental income.

If the person's home is rented and there is no lease agreement, voluntary payments of the person's mortgage by the tenant directly to the mortgage company are considered to be a "gift" to the person and are countable income.

 

E-3343 Prorating Rental Expenses

Revision 09-4; Effective December 1, 2009

 

In multiple family residences, if the units in the building are of approximately equal size, prorate allowable expenses based on the number of units designated for rent compared to the total number of units. If the units are not of approximately equal size, prorate allowable expenses based on the number of rooms in the rental units compared to the total number of rooms in the building. (The rooms do not have to be occupied.)

For rooms in a single residence, prorate allowable expenses based on the number of rooms designated for rent compared to the number of rooms in the house. Do not count bathrooms as rooms; basements/attics are counted only if they have been converted to living spaces.

For land rental, prorate expenses based on the percentage of total acres for rent. There are various types of land rental, including hunting/fishing leases, pasture leases, sharecropping and other farm income not derived from self-employment.

 

E-3344 Rental Expenses

Revision 09-4; Effective December 1, 2009

 

The following table lists some common deductions that arise in budgeting rental income. The list is not intended to be all-inclusive; supervisory approval should be obtained when questionable deductions arise.

Expense Deductibility
Money paid to or for employees not living in the home Allowable
Money paid to or for employees living in the home Allowable
Federal, state or local income taxes Allowable
Sales tax Allowable
Property tax Allowable
Utilities for rental property Allowable
Advertising for tenants Allowable
Realtor or management company fees Allowable
Supplies Allowable
Actual expenses for roomers Allowable
Interest for loans on property Allowable
Depreciation related to self-employment Allowable
Net loss from same period Allowable
Real estate insurance Allowable, except for liability insurance
Farming-related expenses (feed, seed, plants, seedlings, farm supplies, breeding fees, fertilizer and lime, crop insurance, crop storage, fees for livestock testing, etc.) Allowable for self-employment farming
Allowable for unearned income farming only if part of the lease agreement
Repairs or maintenance of property Allowable if property is rented or between tenants
Not allowable, if prior to initial rental of property
Capital asset purchases Not allowable
Capital asset improvements Not allowable
Payment on principal of loan for income-producing property Not allowable
Travel to/from property Not allowable
Net loss from previous period Not allowable
Depreciation related to unearned income (for example, rental income) Not allowable

 

E-3345 Budgeting

Revision 09-4; Effective December 1, 2009

 

For both the eligibility and co-payment budgets, regular variable income policy applies. If the monthly rental income is fixed and there are no allowable expenses to deduct, the eligibility budget may be projected for 12 months. Eligibility can also be certified on an annual basis, whether the income is fixed or not, if it is in the person's interest to do so.

For co-payment purposes, project income and expenses for only six months at a time. Anticipated expenses must be projected for the review period when they are expected to occur. For example, at the January annual review, the eligibility specialist would budget tax deductions based on the amount of taxes paid last year.

Note: The most recent federal tax return, including Schedule E, is helpful in identifying past expenses and in estimating future rental income.

See Appendix XVI, Documentation and Verification Guide.

 

E-3350 Death Benefits

 

Revision 09-4; Effective December 1, 2009

 

Count payments a person gets that were occasioned by the death of another person, except for the amount of such payments that a person spends on the deceased person's last illness and burial expenses. Last illness and burial expenses include related hospital and medical expenses, funeral, burial plot and interment expenses, and other related costs.

Example: If a person receives $2,000 from their uncle's life insurance policy and spends $900 on his last illness and burial expenses, the $1,100 balance is unearned income. If a person spends the entire $2,000 for the last illness and burial, there is no unearned income.

Note: This section does not refer to a person's receipt of proceeds as a result of cashing in his insurance policy. In that situation, consider the proceeds according to the policy for conversion of resource.

Verify countable proceeds of a life insurance policy by one or more of the following methods:

  • obtaining a statement from the insurance company;
  • viewing or obtaining a copy of the insurance payment check, deposit slip or bank statement; or
  • viewing or obtaining receipts or copies of the checks written to pay last illness and burial expenses.

 

E-3360 Prizes and Awards

Revision 18-2; Effective June 1, 2018

 

A prize is generally something a person wins in a contest, lottery or game of chance.

An award is usually something a person receives as the result of a decision by a court, board of arbitration or the like. An award is also something of value conferred or bestowed on someone because of merit or need. Awards do not involve competition.

If a prize or award is not in cash, count the current fair market value of the prize or award, less any expenses involved in obtaining it. For example, deduct legal fees from an award received because of a lawsuit.

Consider income from prizes and awards according to frequency and the nature of the prize or award. Count a prize or award as unearned income in the month of receipt. Review Section E-9000, Infrequent or Irregular Income, to determine if the prize or award is to be treated as a lump-sum payment, infrequent or irregular income, or regular and predictable income. Consider regular and predictable awards as monthly unearned income.

See Appendix XVI, Documentation and Verification Guide.

Reference: Section E-3390, Texas Lottery Commission

 

E-3365 Inheritances

Revision 17-4; Effective December 1, 2017

 

An inheritance is cash, other liquid resources, noncash items or any right in real or personal property received at the death of another. An inheritance is income in the month of receipt unless the inherited item would be an excluded resource.

Example: An individual inherits a vehicle valued at $4,000 and the individual does not own any other vehicles.  Per policy in F-4221 Automobile, one vehicle is excluded regardless of value. Because the vehicle is an excluded resource, the value of the vehicle is not considered as income in the month ownership is received.

Inheritances as a result of the death of another person, to the extent that they are used to pay the expenses of the deceased's last illness and burial, are not considered income.

Notes:

  • A person may not have access to their inheritance pending legal action.
  • Waiving an inheritance may result in a transfer of assets penalty.

If the inheritance is not received in cash, determine its current fair market value. To determine countable income, deduct any expenses that may have been incurred in obtaining the inheritance, such as legal fees and court costs.

Determine whether the inheritance is to be treated as a lump-sum payment, infrequent or irregular income, or regular and predictable income.

See Section E-5000, Variable Income, and Section E-9000, Infrequent or Irregular Income.

See Appendix XVI, Documentation and Verification Guide.

 

E-3370 Cash Gifts and Contributions

Revision 17-4; Effective December 1, 2017

 

A gift is something a person receives which is not repayment to a person for goods or services a person provided and which is not given to a person because of a legal obligation on the giver's part.

A gift is something that is given irrevocably (i.e., the giver relinquishes all control).

Donations and contributions may meet the definition of a gift.

  • A donation is a gift given by a person typically for charitable purposes and/or to benefit a cause without expectation of return.
  • A contribution is a gift or payment to a common fund or collection.

A cash gift or contribution is considered unearned income in the month of receipt.

The value of any non-cash item (other than food or shelter) is considered unearned income in the month of receipt.  A non-cash item is not considered income if the item would become a partially or totally excluded non-liquid resource if retained in the month after the month of receipt.

Expenses involved in obtaining the income are excluded.

If the gift is not received in cash, determine its current fair market value. To determine the countable amount, deduct any expenses that may have been incurred in obtaining the gift, such as legal fees and court costs.

Determine whether the gift is to be treated as a lump-sum payment, infrequent or irregular income or regular and predictable income.

Examples

Gift of cash

A cash gift is counted as unearned income in the month of receipt. Review the infrequent or irregular income policy.

Gift of a car

A gift of a car that qualifies as an excluded resource if retained into the month after the month of receipt is not income. If the car does not qualify as an excluded resource (e.g., it is a second car), the car is counted as income in the month it is received and a resource beginning the next month.

See Section E-5000, Variable Income, and Section E-9000, Infrequent or Irregular Income.

See Appendix XVI, Documentation and Verification Guide.

 

E-3371 Gifts of Domestic Commercial Transportation Tickets

Revision 09-4; Effective December 1, 2009

 

The value of domestic commercial transportation tickets (given as a gift to the person or spouse) is not income unless converted to cash. Domestic transportation is limited to the 50 states, District of Columbia, Commonwealth of Puerto Rico, Virgin Islands, Guam, American Samoa and Northern Mariana Islands.

 

E-3372 Effective Date of Receipt of Inheritance; Disclaimers

Revision 09-4; Effective December 1, 2009

 

Real Property — The effective date of receipt is the date of death unless there is a contested will. If there is a contested will, the effective date of receipt is the date the will is probated.

Personal Property — The effective date of receipt is the date the person actually takes possession.

Note: Prior to Aug. 11, 1993, a disclaimer to an inheritance is not considered as a transfer of resources if transacted before receipt of an inheritance. The disclaimer must be a written statement acknowledged before a notary or other person authorized to take acknowledgement of conveyances of real property.

Examples:

  • The will specifies $50,000 in cash for the person. Date of death is 1/5/92, disclaimer is signed 2/5/92 and will is probated 3/5/92. No transfer.
  • The will specifies $50,000 in cash for the person. Date of death is 1/5/92, will is probated 2/5/92 and disclaimer is signed 2/10/92. Transfer provisions apply.
  • The will specifies 50 acres for the person. Date of death is 3/6/93. If the disclaimer is signed before death, there is no transfer. If after, there is a transfer.
  • There is no will. Date of death is 6/20/93. Through descent and distribution, the person will inherit an undivided half-interest in 50 acres. If the disclaimer is signed before death, there is no transfer. If after, there is a transfer.

After Aug. 11, 1993, a disclaimer of inheritance may result in a transfer of assets penalty regardless of the date the disclaimer is signed or effective.

See Chapter I, Transfer of Assets.

 

E-3373 Facility Payments

Revision 09-4; Effective December 1, 2009

 

The facility may allow a resident's family to use personal funds to pay an agreed-upon amount (in addition to the Medicaid rate) in order to have a private room.

For Medicaid eligibility purposes, if the family pays the difference, consider how it is being paid.

  • If the money is given directly to the person in order to pay the difference to the facility, then that amount is considered income to the person.
  • If the family pays the facility directly, do not consider the amount paid as income to the client.

 

E-3380 Support and Maintenance In Kind

Revision 09-4; Effective December 1, 2009

 

This is food or shelter furnished to a person based on the living arrangement. See Section E-8000, Support and Maintenance.

 

E-3390 Texas Lottery Commission

Revision 18-2; Effective June 1, 2018

Count the gross amount of winnings as unearned income in the month received, regardless of the frequency of pay.

The following Texas Lottery Commission information displays on the Data Broker combined report, if applicable:

  • winner’s full name, date of birth and Social Security number;
  • paid date;
  • gross, net and tax withheld amounts;
  • check ID, claim number and date claim created;
  • void date; and
  • debt offset (is the same as recoupment), reason for the offset, and the agency name the offset is to, withholding amount, withholding number, withholding sequence number, check ID, and Agency ID.
  • Example: Applicant wins $1,000/month; however, there is a debt offset (recoupment) of $100 from the Office of Attorney General (OAG) for child support. The income budgeted will be $1,000.

Note:

  • Provide the void date only if the Texas Lottery Commission voids a check.
  • In these situations, the winning are not counted as income.

The information provided by the Texas Lottery Commission through Data Broker is considered verification of winnings.

Notes:

  • Staff must budget the gross amount reported by the Texas Lottery Commission.
  • Some winners may elect to place their winnings in a trust fund.

Reference:

Trust Funds, F-6000