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Medical Assistance for Families with Children and Adults

2.2.3.4 Income Methodology (Archive)

Income eligibility for Medical Assistance for Families with Children and Adults (MA-FCA) is based on current income and adjustments using the Modified Adjusted Gross Income (MAGI) methodology as follows:

  • Household income includes:

    • The types of income included in Federal taxable income, including losses, minus Federal income tax adjustments

    • Nontaxable foreign earned income and housing cost of citizens or residents of the United States living abroad

    • Nontaxable interest income

    • Nontaxable Social Security and tier one railroad retirement benefits

  • Household income does not include:

    • Scholarships, awards or fellowship grants used for education purposes and not for living expenses

    • Certain American Indian/Alaska Native income

  • Lump sum income is counted in the month received, if it is from a type of income that is included in the calculation of modified adjusted gross income (MAGI). If the lump sum is from an income type that is not included in a person's modified adjusted gross income, it is not counted.

Federal Taxable Income

Federal taxable income are the different types of income that appear in the Income section of the Internal Revenue Service (IRS) form 1040, IRS form 1040-A and or IRS form 1040-EZ. Only the taxable portions of these types of income are included in the adjusted gross income. The types of losses that would be reported on federal income tax returns can offset income. See the appropriate IRS form instructions for examples of federal taxable income. The general types of taxable income include the following:

  • Wages, salary and tips

    • Payroll or pre-tax deductions for childcare, health insurance, retirement plans, transportation assistance and other employee benefits are not taxable and are not included in a person's adjusted gross income.

    • Medicaid waiver payments received by a person who provides HCBS waiver services (personal care services, habilitation services, and other services) to an eligible person living with them are not taxable and not included in a person's adjusted gross income. See Internal Revenue Bulletin #2014-4 for more information.

      If the eligible person does not live with the person providing HCBS waiver services, the Medicaid waiver payments are taxable and are included in the person's adjusted gross income.

  • Interest

  • Dividends

  • Taxable refunds, credits or offsets of state and local income taxes

  • Alimony received

  • Business income or loss (includes self-employment)

  • Capital gains or losses

  • Other gains or losses

  • Individual retirement account (IRA) distributions

  • Pension and annuity payments

  • Income or loss  from rental real estate, royalties, partnerships, S corporations, trusts, etc.

  • Farm income or loss

  • Unemployment compensation

  • Social Security benefits

  • Other income or loss

  • Net operating loss, including a carryforward loss

Federal Income Tax Adjustments

The types of adjustments that appear in the Adjusted Gross Income section of the 1040 or 1040-A are subtracted from gross income to calculate the adjusted gross income. Only specific types of adjustments are allowed. See the appropriate IRS form instructions for specific information about the types of adjustments.

  • Educator expenses

  • Certain business expenses of reservists, performing artists and fee-basis government officials

  • Health savings account

  • Moving expenses

  • Deductible portion of self-employment tax

  • Self-employed Simplified Employee Pension (SEP), Savings Incentive Match Plan for Employees (SIMPLE) and qualified plans

  • Self-employed health insurance

  • Penalty on early withdrawal of savings

  • Alimony paid (spousal support)

  • IRA deduction

  • Student loan interest

  • Tuition and fees

  • Domestic production activities

Scholarships, Awards or Fellowship Grants

Taxable scholarships, awards or grants used for education purposes and not for living expenses (room and board) are excluded income under the MA-FCA income methodology.

American Indian and Alaska Native Income

The following income is excluded under the MA-FCA income methodology for American Indian and Alaska Native people:

  • Distributions from Alaska Native Corporations and Settlement Trusts

  • Distributions from any property held in trust, subject to federal restrictions, located within the most recent boundaries of a prior federal reservation, or otherwise under the supervision of the Secretary of the Interior

  • Distributions and payments from rents, leases, rights of way, royalties, usage rights or natural resource extraction and harvest from:

    • rights of ownership or possession in properties held in trust under the supervision of the Secretary of the Interior; or

    • federally protected rights regarding off-reservation hunting, fishing, gathering or usage of natural resources.

  • Distributions resulting from real property ownership interests related to natural resources and improvements:

    • located on or near a reservation or within the most recent boundaries of a prior federal reservation, or

    • resulting from the exercise of federally protected rights relating to such real property ownership interests.

  • Payments resulting from ownership interests in or usage rights to items that have unique religious, spiritual, traditional, or cultural significance or rights that support subsistence or a traditional lifestyle according to applicable Tribal Law or custom

  • Student financial assistance provided under the Bureau of Indian Affairs education programs

Lump Sum Income

Under MA-FCA, lump sum income is one-time income that is not predictable. Periodic reoccurring income is not lump sum income. Lump sum income is only counted under MA-FCA if it is a type of income that is included in the calculation of modified adjusted gross income (MAGI).

Examples of lump sum income that is part of the MAGI calculation include, but are not limited to:

  • Winnings (lottery, gambling)

  • Alimony Settlements

  • Wage bonuses

Legal Citations

Code of Federal Regulations, title 42, section 435.603

Code of Federal Regulations, title 45, section 155.305

Minnesota Statutes, section 256B.057

Minnesota Statutes, section 256L.01

Published:  January 1, 2018

Archived: September 1, 2018