Self-Employment Income
Office of Medicaid Eligibility Policy
Medicaid Eligibility and Community Support
October 15, 2019
Topics
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• MAGI Introduction
• Self-Employment Income
• Income Enhancements
• Deductions
• Resources
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MAGI Introduction
MAGI Introduction
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Modified adjusted gross income (MAGI) is how income is
calculated for MAGI-based Washington Apple Health (Medicaid)
and Children’s Health Insurance Program (CHIP) (Apple Health for
Kids with Premiums) programs.
Generally, the MAGI calculation is an individual’s adjusted gross
income (AGI) as determined by the Internal Revenue Code (IRC)
with a few modifications.
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Self-Employment Income
Self-Employment Income
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Self-employment income is income that is earned by a person
from:
• Running a business;
• Performing a service;
• Selling items that are made; or
• Reselling items with the intent to make a profit.
This income can be earned if the person is:
• Carrying on a trade;
• In business as a sole proprietor or an independent
contractor;
• A member of a partnership that carries on a business; or
• In business for themselves other than listed above.
See
WAC 182-509-0365
Self-Employment Income
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Self-employment income is determined using an individual’s most
recent federal tax return unless:
• The individual does not file taxes;
• Has not been in business long enough to have filed a tax
return for their new business; or
• Their most recent tax return is not a good reflection of their
current income.
If any of these conditions apply, individuals can report the income
from their most recent three month profit and loss statement.
Self-Employment Income
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Under MAGI, net self-employment income is used to
determine eligibity for MAGI based Apple Health Programs.
Gross Self-Employment Income
– Allowable IRS Business Expenses
Net Self-Employment Income
Self-Employment Income
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The many types of self-employment income include those for
individuals who:
• Babysit part time
• Drive for Uber or Lyft
• Rent out a room of their home
• Resell items on Ebay
• Own their own daycare
• Partner in a medical practice
• Shareholders in their own corporation
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Sole Proprietorship
Description • Individual in business alone
• Simple to form and operate
• Most common business structure
• Can include royalties and some limited liability
companies (LLC)
Business required to file taxes? No
Tax Form Schedule C IRS Form 1040
Schedule 1 Line
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Common
Examples
Babysitters, bookkeepers, real estate agents,
shopkeepers, private contractors, translators, truck
drivers, insurance agents, etc.
Sole Proprietorship
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Partnership
Description • Income received from a business when a
relationship exists between two or more persons
who join to carry on a trade or business
• Types of partnerships can include: general,
limited, limited liability (LLP), and limited liability
limited (LLLP)
Business required to file taxes? Yes
Tax Form Schedule E
Form 1065
IRS Form 1040
Schedule 1 Line
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Common
Examples
Real estate businesses, dance studios, medical and
legal practices, marketing firms, small retail stores,
etc.
Partnership
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Corporation
Description • Corporations have a more complex business structure
• Shareholders or owners of the corporation are
employees of the corporation and receive wages and
can receive additional income from the corporation
• Types of corporations can be C corporations, S
corporations, non-profit, and some limited liability
companies (LLCs)
Business required to file taxes? Yes
Tax Form Schedule E
Form 1120/
1120S
IRS Form 1040
Schedule 1 Line
7 and 17
Common
Examples
Gas stations, general stores, real estate businesses,
insurance agencies, chiropractors, dentists, etc.
Corporation
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Rental
Description • Income or services received from the use of real
estate or personal property
• Can include royalties (typically property royalties)
Business required to file taxes? No
Tax Form Schedule E IRS Form 1040
Schedule 1 Line
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Common
Examples
Renting a room out of your house, leasing part of
your property as storage, having numerous rental
homes, etc.
Rental
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Farming
Description • Income received from farming activities
Business required to file taxes? No
Tax Form Schedule F IRS Form 1040
Schedule 1 Line
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Common
Examples
Income received from dairy, poultry, fish farming or
operating a plantation, ranch, range, orchard or
grove
Farming
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Income Enhancements
Income Enhancements
• Individuals are able to enter income as a loss. Negative amounts
display in red for the following income types:
o Rental, Self-Employment, Capital Gains, Farming and
Other Taxable Income.
• Negative income calculated on the Calculators carries over to the
income details page.
• Negative income passes to Eligibility Service (ES) as a negative
amount.
• When an error occurs on the income or deduction page the field
opens for the individual to make a correction.
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Negative Income Video
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Deductions
Deductions
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Deductions are adjustments the IRS allows when calculating an
individual’s adjusted gross income.
These deductions are also allowed, following the same IRS rules
and limits, when determining eligibility for MAGI-based Apple Health
programs.
Some deductions have yearly limits and some deductions are
variable. Deductions are annualized through an individual’s
certification period.
See
WAC 182-509-0300
Deduction Changes
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Certain deductions have being capped to match IRS standards.
Back in January, the School Tuition and Fees deduction no longer
reduced countable income.
The following deductions are capped:
• Educator expenses $250/year for individual and $500/year
for household
• Student loan interest $2500/year or $208.33/month
• Health Savings Account and pre-tax retirement are capped at
an amount based on age
Deductions
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Student Loan Interest
Definition
Deduction for interest paid on student loans. Loans must have
been used for qualifying educational expenses while attending
an educational institution. Principal payments are not
deductible.
The loan payments must be for the individual, their spouse, or
their tax dependents (for tax filers) or their children in the
household (for non-filers).
Max
Amount
$2500/year
$208.33/month
IRS Form 1040
Schedule 1 Line
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Other
Document
Types
IRS Form 1098-E
Statement from the lender showing interest amount paid
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Armed Forces Moving Expenses
Definition
Deductions for members of the Armed Forces on active duty
and due to a permanent military order move.
Max
Amount
Variable
IRS Form 1040
Schedule 1 Line
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Other
Document
Types
Receipts of moving expenses since January of the current
year; statement of previous address; verification of current
employment
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Spousal Support / Alimony
Definition
Deduction for court ordered spousal support/alimony with a
court order date prior to 1/1/2019. Does not include voluntary
alimony payments or child support payments.
Max
Amount
Variable
IRS Form 1040
Schedule 1 Line
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Other
Document
Types
Court ordered spousal support/alimony with a court order date
prior to 01/01/2019 that shows the obligation amount.
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Health Savings Account
Definition
Deductions for contributions made to a pre-tax or tax
deductible health savings account designated for medical
related expenses. Spouses can have family accounts or
individual accounts for themselves.
Max
Amount
Individual $3500/year or $291.66/month
Family $7000/year or $583.33/month
Add an additional $1,000/year contribution if
the individual is age 55 or older
IRS Form
1040
Schedule
1 Line
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Verification
Types
Pre-tax: monthly amounts listed on wage stubs
Tax deductible: IRS Tax Form 8889
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Pre-Tax Retirement Account
Definition
Deduction for contributions made to a pre-tax retirement
account. Excludes: Roth IRA and Simple IRA
Max
Amount
Age 49 and below $6,000/year or
$500.00/month;
Age 50 or older $7,000/year or
$583.33/month
IRS Form
1040
Schedule
1 Line
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Other
Document
Types
IRS Form W-2
Wage stubs
IRS Tax Form 5498
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Self-Employment Tax
Definition
Deduction for tax paid to the federal government to fund
Medicare and Social Security for self-employed individuals who
net more than $400 per year or employees of churches or
church organizations with income of more than $108.28 per
year.
Max
Amount
Variable IRS Form 1040
Schedule 1 Line
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Other
Document
Types
Monthly or quarterly statement or receipt
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Self-Employment Retirement Plan
Definition
Deduction for contributions made to a self-employment
retirement plan including SEP, Simple, or Qualified Plan
Max
Amount
Variable
IRS Form 1040
Schedule 1 Line
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Self-Employment Health Insurance
Definition
Deduction for contributions made to self-employment health
insurance plans
Max
Amount
Variable
IRS Form 1040
Schedule 1 Line
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Educator Expenses
Definition
Deduction for expenses for unreimbursed educator expenses
(e.g., books, supplies, and other equipment)
The individual must be a licensed educator (teaching K-12 and
works 900+ hours per school year)
Max
Amount
$250/year or $20.83/month for
each educator
IRS Form 1040
Schedule 1 Line
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Other
Document
Types
Receipts showing amounts paid out of pocket for qualifying
supplies
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Penalty on Early Withdrawal of
Savings
Definition
Deduction for penalty on withdrawal of funds from a certificate
of deposit or other deferred interest account before maturity.
Max
Amount
Variable
IRS Form 1040
Schedule 1 Line
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Other
Document
Types
IRS Form 1099-INT
Statement from financial institution
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Certain Claimable Business Expenses of
U.S. Reservist, Performing Artists, and Fee-
Based Government Officials
Definition
Deduction for U.S. reservists, performing artists, or fee-based
government employees who have expenses necessary for
their job, including travel of more than 100 miles.
Max
Amount
Variable
IRS Form 1040
Schedule 1 Line
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Other
Document
Types
IRS Form 2106 or 2106-EZ
Receipts showing allowable expenses
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Resources
Resources
MAGI Income Washington Administrative Codes
hca.wa.gov/free-or-low-cost-health-care/program-
administration/income
HCA Training & Education
hca.wa.gov/free-or-low-cost-health-care/apple-health-medicaid-
coverage/stakeholder-training-and-education
HCA Area Representatives
hca.wa.gov/assets/free-or-low-cost/area_representatives.pdf
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