Income Deductions 510-03-85-35

(Revised 10/1/2024 ML #3861)

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Instead of itemized disregards and deductions, a standard deduction equal to 5% of the Federal Poverty Level (FPL) is allowed under ACA Medicaid.

Note: This disregard is not deducted from income as the ACA Income Levels have been increased by 5% to allow for this disregard.

In addition, the following deductions can be allowed from income under ACA Medicaid:

1. Pre-tax deductions (from the gross pay listed on paystubs)

2. Adjusted Gross Income deductions from gross income that are used in determining the countable Adjusted Gross Income for tax purposes (Listed on the Form 1040 in the ‘Adjusted Gross Income’ section)
   1. Educator expenses
   2. Business expenses of reservist, performing artists and fee-basis government officials
   3. Health savings account deduction
   4. Moving expenses (only for active duty members of the military who are ordered to move or change duty station)
   5. Deductible portion of self-employment tax
   6. Contributions to self-employed SEP, SIMPLE and qualified plans
   7. Self-employed health insurance deduction
   8. Penalty on early withdrawal of savings
   9. Alimony paid when alimony agreements have been finalized on or before December 31,2018
   10. Contributions to IRA
   11. Student loan interest deduction
   12. Domestic production activities deduction

When determining income using the Federal Income Tax forms, amounts for the above deductions can only be allowed IF they have not been allowed when determining the Adjusted Gross Income.