E-2200, Earned Income Exemptions

E-2210 Income Tax Credits

Revision 10-1; Effective March 1, 2010

An earned income tax credit (EITC) is a special tax credit that reduces the federal tax liability of certain low-income working taxpayers. This tax credit may or may not result in a payment to the taxpayer. EITC payments are allowed as an advance from an employer or as a refund from the Internal Revenue Service.

The child tax credit (CTC) is a special refundable federal tax credit that is available to certain low-income taxpayers with earned income. They must be parents, step-parents, grandparents or foster parents with a dependent child. This child tax credit may provide a refund to individuals even if they do not owe any tax.

Any refund of federal income taxes a person receives under Section 32 of the Internal Revenue Code (relating to EITC or CTC ) and any payment a person receives from an employer under Section 3507 of the Internal Revenue Code (relating to advance payment of an EITC) is exempt. Exempt this income from the eligibility budget and the budget to determine co-payment.

Relationship of income to resources. An unspent EITC or CTC payment is not counted as a resource for the month it is received and for the nine months following the month of receipt. After that, count any remaining funds from the EITC or CTC payment as a resource. See Section F-2260, Exclusions from Resources Provided by Other Statutes.

Example: The EITC payment is received in May. The EITC payment is not income in May. Any remaining funds from the EITC payment are a resource as of the first of March of the following year.

 

E-2220 Student Earnings

Revision 09-4; Effective December 1, 2009

A person who is under age 22 and regularly attending school is considered a student. A student's income is exempt from the eligibility budget and the budget to determine co-payment, up to the monthly limit but not more than the calendar year annual limit.

This exemption may apply to an eligible or ineligible:

  • person;
  • child;
  • spouse; or
  • parent.

Apply the exemption:

  • consecutively to months in which there is earned income until the maximum yearly limit is exhausted or the person is no longer a student under age 22; and
  • only to a student’s own earned income.

The limits are set by the Social Security Administration for the SSI program and published annually in the Federal Register. The monthly and yearly limits are calculated annually based on increases in the cost of living index. Under this calculation, these amounts will never be lower than the previous year's amounts. However, there may be years when no increases result from the calculation.

See "Special Income Exemption for Student" in Appendix XXXI, Budget Reference Chart, for the monthly and yearly amount limits for the exemption.