Medicaid counts most money you receive, but not all of it

Medicaid looks at your gross income — the money you get before taxes come out. This includes wages from a job, self-employment income, Social Security, unemployment benefits, child support, and rental income. Some money does not count, though, and the rules change depending on which Medicaid program you are trying to enter and which state you live in.

The reason Medicaid cares about income is simple: it is a program for people with lower incomes. Each state sets its own income limit, and if you earn above that limit, you do not may have access to — with a few exceptions for specific programs like Medicaid for the elderly or disabled.

Understanding what counts and what does not matters because a single uncounted dollar of income can mean the difference between approval and denial. The income rules are also different depending on whether you are applying as an individual, a parent, a child, or a pregnant person.

Key Takeaways

  • Medicaid counts wages, self-employment income, Social Security, unemployment, child support, and rental income as money you have to report.
  • Some income does not count at all, including Supplemental Security Income (SSI), certain tax refunds, and money from food assistance programs.
  • Your state sets the income limit, and it varies by age, family size, and whether you are disabled or pregnant.
  • If you are self-employed or have irregular income, Medicaid will average your earnings over a set period rather than looking at one month alone.
  • Your spouse's income may or may not count depending on whether you live in a community property state and which Medicaid program you are entering.

Income that Medicaid always counts

Earned income is any money you make from working. This includes wages from an employer, tips, bonuses, and commissions. If you are self-employed, Medicaid counts your net self-employment income — the money left after you subtract business expenses. You will need to show tax returns or profit-and-loss statements to prove what you earned.

Unearned income is money you receive without working for it. Social Security retirement or disability benefits count. So do unemployment insurance, workers' compensation, veterans' benefits, pensions, and annuities. Child support and alimony count as income. Rental income from property you own counts. Interest and dividends from investments count. If someone gives you money regularly — say, a family member sends you $200 a month — Medicaid may count that as income depending on your state's rules.

If you receive money from a trust, Medicaid counts the amount you actually receive, not the full value of the trust. If you inherit money or receive a one-time gift, it does not count as income (though it may count as a resource, which is different).

Income that does not count

Supplemental Security Income (SSI) is the most common income that does not count. If you receive SSI, you do not have to report it to Medicaid — in fact, most people who get SSI are automatically enrolled in Medicaid in their state. This is true even though SSI is a federal benefit.

Tax refunds do not count as income. Money from food assistance programs (SNAP, formerly food stamps) does not count. Energy assistance payments do not count. Certain scholarships and educational grants do not count, though this varies by state. Money from the Earned Income Tax Credit (EITC) does not count as income in most states.

Some states do not count irregular or one-time payments — for example, a bonus you receive once a year, or money from selling something you own. The rules here vary widely, so you will need to check with your state program.

How Medicaid handles self-employment and irregular income

If you are self-employed or your income changes month to month, Medicaid does not look at just one month. Instead, it averages your income over a period of time — usually the past three months or the past year, depending on your state and the program you are entering.

For self-employment income, you will need to provide tax returns or profit-and-loss statements. Medicaid will subtract your business expenses from your gross revenue to get your net income. If you are new to self-employment and do not have a full year of tax returns yet, some states will let you project your income based on what you have earned so far.

If your income is seasonal — for example, you work construction and have no income in winter — tell the Medicaid worker. Some programs can account for seasonal patterns and average your income across the whole year rather than looking at your low months alone.

Spouse's income and family structure

Whether your spouse's income counts depends on your state and which Medicaid program you are entering. In most states, if you are married and applying for regular Medicaid, your spouse's income counts toward your household income limit. This is true even if you file taxes separately.

There are exceptions. In community property states — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin — the rules are different. In those states, Medicaid may count only half of your spouse's income, or may not count it at all depending on the program.

If you are applying for Medicaid as a parent, your spouse's income counts. If you are applying as a child or pregnant person, your parent's income counts. If you are elderly or disabled and applying for a special Medicaid program, your spouse's income may not count at all.

Income limits vary by state and family size

Each state sets its own income limit for Medicaid. A single person might may have access to in one state at $1,500 a month but not in another at $1,200 a month. Family size matters too — the limit is higher for a family of four than for a single person.

Some states use the federal poverty level as their income limit. Others set their limit higher or lower. A few states have different limits for different groups — for example, a higher limit for pregnant people or children than for adults.

Your state's Medicaid program will tell you the exact income limit when you contact them or start an application. If you are close to the limit, ask whether any income does not count — sometimes removing uncounted income from your total is enough to bring you under the limit.

What to bring when you report your income

When you apply for Medicaid, you will need to prove your income. Bring recent pay stubs if you work for an employer — usually the last two months. If you are self-employed, bring your most recent tax return and, if you have one, a profit-and-loss statement for the current year. If you receive Social Security or other benefits, bring a benefit statement showing the monthly amount.

If you receive child support or alimony, bring the court order and recent payments (bank statements or cancelled checks). If you have rental income, bring your lease and proof of payments received. If your income is irregular or you are new to a job, explain that to the Medicaid worker — they may ask for more documentation or may average your income differently.

Keep copies of everything you submit. If Medicaid asks you to verify your income later, you will have proof of what you reported.

Frequently Asked Questions

Does my child's income count if I am applying for Medicaid?

No. When you apply for Medicaid as a parent, only your income and your spouse's income count. Your children's income does not count toward your household income limit, even if they work and live with you.

If I get paid in cash, do I have to report it?

Yes. Medicaid counts all income, whether you receive it by check, direct deposit, or cash. If you are self-employed and paid in cash, you will need to show records of what you earned — a ledger, receipts, or tax returns. Medicaid cannot verify cash income without documentation.

Does money from my 401(k) or retirement account count as income?

Only if you actually withdraw it. If you have a 401(k) or IRA that you are not touching, it does not count as income — though it may count as a resource. If you withdraw money from it, that withdrawal counts as income in the month you receive it.

What if my income goes up after I am approved for Medicaid?

You are required to report the change to Medicaid. Most states give you a grace period — usually 10 days — to report changes. If your new income is above the limit, your Medicaid coverage will end on a specific date. If it is only slightly above the limit, ask whether any income does not count.

Does my roommate's income count toward my Medicaid income limit?

No. Only your income, your spouse's income, and your children's income (if you are their parent) count. A roommate's income does not count, even if you share expenses.