Are Social Security Benefits Counted as Income for Medicaid Eligibility?

In this article...
  • Eligibility for Medicaid is based on your income. Social Security benefits could potentially affect your eligibility for Medicaid and other federal programs.

Determining your eligibility for Medicaid can be a complicated process. Because Medicaid coverage is dependent on your income level, knowing which types of income do and don't count for purposes of Medicaid can help you maintain your eligibility for this health coverage. Here are some helpful facts to ensure that you receive the benefits you're entitled to under the Medicaid program.

Does Social Security Count as Income for Medicaid Eligibility?

Most Social Security disability and retirement income does count as income for purposes of Medicaid eligibility. The income figure used to decide whether you are eligible for Medicaid is known as modified adjusted gross income, or MAGI. Certain types of Social Security benefits, however, are not included in MAGI and are not figured into your income when deciding whether you are eligible for Medicaid coverage.

What Is MAGI?

MAGI is calculated by adding together the eligible income of all people in your household who are required to file taxes with the Internal Revenue Service. The income of your dependents who are not required to file taxes but do so to receive a refund does not need to be included in income figures for MAGI.

What Is Included in MAGI?

Medicaid determines your eligibility based on your reported household MAGI. This is a relatively complex process that excludes some types of income while including others. In general, MAGI includes the following types of income: 

  • The adjusted gross income you report on your federal tax return, which may include tips, earned wages and self-employment income
  • Certain types of tax-exempt interest
  • Excluded foreign income
  • Income from rentals and royalties
  • Capital gains and investment income
  • Non-taxable Social Security benefits, including disability payments
  • Taxable Social Security benefits
  • Retirement and pension payments

Other types of income may be included in MAGI in certain instances. For instance, unemployment compensation is usually included in this figure. The exception would be the additional $300 per week in federal payments that began in 2019 and is still in effect. Alimony that is paid on divorces and separations that were finalized before January 1, 2019, should be included in MAGI. Divorces and separations finalized on or after that date, however, are not included as part of MAGI.

What Types of Income Are Not Included in MAGI?

You do not need to include certain types of income in MAGI when determining your eligibility for Medicaid:

  • Child support payments
  • Stimulus and economic impact payments
  • Gifts from friends or relatives
  • Supplemental Security income
  • Workers compensation payments
  • The proceeds from student loans, bank loans and home equity loans
  • Child tax credit payments from the IRS
  • Veteran disability payments
  • Income earned by dependents who are not required to file a tax return

You can exclude these types of income when figuring your MAGI for purposes of Medicaid eligibility.

Will I Qualify for Medicaid?

The income requirements and cutoffs for each state are different. In all states, some coverage is available for low-income families and individuals, children, pregnant women, seniors and those with disabilities. Some states have expanded Medicaid eligibility to cover all adults below a certain income level. The Children's Health Insurance Program (CHIP) is available for children who meet the eligibility requirements for this federal health insurance program.

Touching base with your state Medicaid office is the best, most practical way to determine whether you and your family are eligible for Medicaid. Your state agency can provide the most accurate, up-to-date information on the types of income that must be reported in MAGI and on your overall eligibility for federal and state Medicaid assistance.