Refund vs. taxable income vs. credits
A tax refund is money you receive back from the IRS when you paid more taxes than you owed for the year. It also includes any refundable tax credits you qualify for, such as the Earned Income Tax Credit or the Child Tax Credit.
Federal law prohibits government agencies from counting your tax refund as income when deciding your eligibility for federal benefits and assistance, as well as for state programs that are federally funded.
How common programs treat tax refunds
Federally funded benefits and assistance programs can’t count your tax refund as income. However, some may consider it a resource 12 months after you receive it, which can matter for programs with an asset limit.
| Program type | Does a tax refund count? | What on your return might matter |
|---|---|---|
| SNAP | Considered a resource after 12 months | Gross income, less allowable deductions |
| Medicaid and CHIP | Considered a resource after 12 months | Modified adjusted gross income |
| Marketplace premium tax credits | No | Modified adjusted gross income |
| Supplemental Security Income (SSI) | Considered a resource after 12 months | Earned income, plus unearned, in-kind, and deemed income |
| Federal housing assistance | Considered a resource after 12 months | Gross income |
| State-funded programs | Varies by state and program | Check your state’s rules |
What counts as income for government benefits?
Your income is a primary qualifier for many government benefits programs. In the cases of Medicaid, CHIP, and marketplace premium tax credits, programs use your modified adjusted gross income (MAGI), which is your adjusted gross income with certain deductions and exclusions added back in.
Meanwhile, SNAP and federal housing assistance programs use your gross income; SNAP does allow you to deduct certain expenses. Keep in mind that you may need to report any income changes that occur during the year. If you don’t, you may be required to repay benefits you’ve received, pay a penalty, or have your benefits suspended.
Unspent refunds can count after 12 months
Programs that look at both your income and your assets won’t count your federal refund for the first year after you receive it. However, if you don’t spend the money during that time, it could potentially reduce how much you qualify for.
Keep track of your bank statements to make sure you know when you received the refund, so you can plan for the end of the exclusion period.
The federal government can use your refund to pay certain debts
Through the Treasury Offset Program, the federal government can use some or all of your federal tax refund to pay past-due debts you owe to certain federal and state agencies.
Examples include defaulted federal student loans, unemployment compensation, state income taxes, and unpaid child support. If you have eligible unpaid debts, you’ll receive a notice at least 60 days before the unpaid amount is sent to the program.
