Disregarded Income
Medicaid Income Disregards – Quick Facts
Income disregards and exclusions can make applicants eligible even if gross income is over the limit.
Medicaid classifies income as earned or unearned, with different rules for each.
Amounts and rules vary widely by state and Medicaid program type.
Certain benefits, like VA Aid & Attendance, are excluded by law in some or all states.
What Does Medicaid Mean by “Income”?
Medicaid separates income into two main categories:
- Earned income – Wages, self-employment earnings, royalties from published work, and sheltered workshop payments.
- Unearned income – Any non-work income such as pensions, annuities, Social Security, rental income, cash gifts, interest, and unemployment benefits.
What Are Income Disregards, Exclusions, and Deductions?
These are amounts of income that Medicaid does not count toward eligibility. They are subtracted from gross income before determining if an applicant meets the limit. The terms “disregard,” “exclusion,” and “deduction” are often used interchangeably.
This means someone can have gross income over the Medicaid limit, but still qualify after applying these reductions. The exact rules vary by state and program.
What Is the $20 General Income Deduction?
This common exclusion allows up to $20 to be removed from unearned income each month. If unearned income is less than $20, the remaining deduction applies to earned income. Most states allow only one $20 deduction per household.
State Variations: In 2025, Illinois uses $25, New Hampshire $13, and Mississippi may allow up to $50 for certain programs.
Example: If Roy has $650 in unearned income, applying the $20 deduction leaves $630 countable. If Caroline has $10 unearned and $342 earned, all $10 unearned is excluded plus $10 of earned, leaving $332 countable.
What Is the $65 Earned Income Deduction and Half-Remaining Rule?
Applicants can deduct $65 from earned income, then exclude half of what remains. This is applied after the $20 general deduction.
Example: Joann has $1,350 earned income. After the $20 general deduction and $65 earned deduction, half of the remaining amount is excluded, leaving $632.50 countable.
Which Income Is Protected Under Federal Law?
Some income, such as VA Aid and Attendance and VA Housebound Allowances, is not counted toward Medicaid eligibility in certain states. In some states, only the allowance portion is excluded; in others, both the base pension and the allowance are excluded.
Do States Have Unique Income Exclusions?
Yes. Beyond these common exclusions, states may set their own rules depending on the Medicaid program. Contact your state Medicaid agency for details on state-specific deductions.
