230-2 Tax Filer's MAGI Household

Effective Date:  January 1, 2017

Previous Policy

1     Definitions

The following definitions apply for MAGI households.

A           "Child" means a biological, adopted or stepchild.

B           "MAGI household" means the household size and composition for someone whose CHIP eligibility is determined using the MAGI methodology.

C          "Parent" means a biological, adoptive or step parent.

D          "Sibling" means a biological, adoptive, half-sibling, or step-sibling who meets the age limits, and school attendance requirement if applicable.

E           "Tax Household" means the number of individuals included on a tax filer's tax return for whom the tax filer can claim personal exemptions.

 

2     Tax household rules

The MAGI household follows tax rules about who is part of the household with some exceptions. 

The following information defines who can be counted in a tax filer's tax household.  This is to help establish an understanding of the tax rules about households which will be the basis for how to build the MAGI household for CHIP.

A           The tax filer.  This is the individual who is applying for CHIP and states an intent to file a tax return, and is not being claimed as a dependent by another tax filer.

B           The spouse of a tax filer is included in the tax household if the couple files a joint return.  In essence, they are both filers. 

NOTE: Spouses living together are always included in each other’s MAGI household for CHIP even if the couple does not file a joint return), which is discussed in section C below. Unmarried couples are not allowed to file a joint tax return. (See common-law marriage policy in C.2.)

C          Dependent individuals are people for whom a tax filer may claim an exemption and they include:

a           Qualifying child.  To be a qualifying child for the purpose of claiming a tax exemption, the child must:

o      Be under age 19, or age 19 through 23 and enrolled in school full-time, or be a child of any age who is permanently and totally disabled.  If the client says he can claim the disabled child, accept the client's statement.

o      Not have provided 50% of his own support.  The child may be claimed by the parent he lives with, or in some cases by the non-custodial parent.

o      Be the tax filer's son, daughter, stepchild, foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendent of any of them. An adopted child is treated as the tax filer's child, including a child placed for adoption with the tax filer. (Tax law makes no distinction between children who are adopted and those who are still in the adoption process.)

o      Be younger than either the tax filer or the tax filer's spouse.

o      Live with the tax filer more than half of the year (some exceptions apply for temporary absence, children who were born or who died during the year, and when parents are divorced.)

b           A qualifying relative or unrelated person who lives with the tax filer the whole year and is someone who:

o      Is a relative of the filer or the filer's spouse, or is an unrelated person; and

o      Cannot be the tax filer's qualifying child or a qualifying child of another taxpayer, (so a child who does not meet the criteria to be a qualifying child may be claimed as a dependent relative); and

o      Is not expected to have income in excess of the income limit for dependents (412-3); and

o      The tax filer expects to provide more than 50% of the person's support.

c            A qualifying relative who does not live with the tax filer, meets the other criteria in 3.b., and is one of the following relatives:  

o      child or descendant of child, including a foster child;

o      brother or sister;

o      parent or grandparent including step parent, but not foster parent;

o      niece or nephew;

o      aunt or uncle;

o      in-laws:  Son, Daughter, Mother, Father, Brother or Sister. 

d           Death or divorce does not change relationships that were established by marriage.

3     MAGI CHIP Household ("MAGI Household") for tax filers

The MAGI household for a tax filer  is determined by following tax rules about household composition with some modifications.  To determine the MAGI household for a child living with a parent, build the MAGI household of the tax filer parent first.

o      A tax filer's household can include individuals who are not typically included in a CHIP household, such as children age 19-23.  That is because the MAGI household follows tax rules about who is included in the MAGI household size.  Therefore, it is possible for the CHIP household to include a foster child, an adult child, or a dependent person who is not the spouse or child of the tax filer. In addition, dependents claimed by a tax filer may not always live with the tax filer.

A     MAGI Household size for a tax filer.

a           To determine the MAGI household size for an applicant or recipient who expects to file a federal tax return and cannot be claimed as a dependent by another tax filer, use his tax household size (section B) with the following additions. (If the filer is a child who lives with parents who will not file a tax return, see section 230-3.)

I       Include a spouse living with the tax filer who is not part of the tax household because the spouse is filing a separate return or is not filing a return.

o      If the couple files a joint return, the spouse is already counted in the tax household and therefore is counted in the MAGI household.

o      Married couples that are permanently separated, not living together, and filing a joint tax return, will be treated as non-tax filers.  The MAGI household will not include the absent spouse (230-3).

II     Include the expected number of unborn children of anyone being counted in the tax filer's MAGI household who is pregnant at the time of application or the eligibility review period.

Example: John, age 23, attends the university full time. He lives with his mother, Jessica, and his 17 year old sister, Chris who is pregnant.  John works 15 hours per week, earning minimum wage.  His mother provides more than 50% of his support. She claims John and Chris as qualifying children on her taxes.  Jessica's MAGI household includes herself, John, Chris and Chris' unborn child.  Jessica is able to claim them as dependents for the purposes of determining her Medicaid household.

Example: Mary is applying for medical services.  She has three children: Erika, a 19 year old full-time college student, Trudy age 15 and Miriam age 17. Vanessa works 20 hours per week, earning minimum wage.  Her mother states she provides more than 50% of Vanessa's support.  Mary can claim Vanessa as her dependent.  Mary's MAGI household includes herself, Vanessa, Trudy and Miriam. Due to the amount that she earns, Vanessa will be expected to be required to file a tax return. Her income will count as part of the household income (412-3).

b           Accept the client's statement about filing a tax return.

c            Accept the client's statement about a pregnancy and the expected number of unborn children.

d           Accept the client's statement about dependents he expects to claim unless the agency has information that conflicts with the client's statement. 

I         If the agency has information that does not reasonably compare with the client's statement about claiming someone as a dependent, ask the tax filer for information supporting their statement.

II      If the tax filer cannot establish a reasonable explanation of why someone can be claimed as a dependent, do not count that person in the tax filer's MAGI household.  

Example: If the tax filer claims an unrelated person as a dependent, but that person's income exceeds (or is expected to exceed) the limit for a dependent, do not count that person in the tax filer's MAGI household.

B     MAGI Household size for the spouse of a tax filer.

Spouses living together are always included in each other's MAGI household for CHIP, even if the couples do not file a joint return.  Build the MAGI household for the spouse of a tax filer if the spouse could be eligible for CHIP.

a           Joint filers who live together. 

If a married couple files a joint tax return, the MAGI household for the tax filer's spouse is the same as the MAGI household for the tax filer. 

b           Separate filers who live together.  

I       The MAGI household for a spouse who files a separate tax return includes:

o      Both spouses (who are filing separate returns);

o      The number of dependents the individual expects to claim as exemptions on his own return;

o      The expected number of unborn children of anyone included in the individual's MAGI household.

II     If a spouse is living with his parent who is claiming him as a dependent child, follow rules for children of a tax filer.

III  If a spouse will not be claimed on a joint return with his spouse, will not be claimed as a dependent by another tax filer, and will not file a return himself, follow the rules for non-filers to determine the spouse's MAGI household (230-3).

IV   Utah does not recognize common law marriages unless they have received a certificate from a court, in which case, they are married.

V      If an unmarried couple states they are filing taxes jointly, and declare a common-law marriage, we will treat them as non-tax filers.

o      Utah will allow a couple to file a joint tax return in they entered into a common-law marriage in a state that recognized such relationships and who later moved to Utah.

o      Take the client's statement unless the agency has conflicting information.

C     MAGI household of children of a tax filer

Build the household separately for each child living with the applicant tax filer based on the situation for each child. Children in the same household may have different MAGI household sizes.

When divorced or separated parents have joint custody, determine the child's residence based on section 230-1. The child's MAGI household will be determined based on where the child lives and the following rules.

a           If the child meets the criteria of being a qualifying child and lives with only two parents who file a joint return and claim an exemption for the child, the child's MAGI household size is the same as the parents' MAGI household size with one addition: 

o      If the child is married and also lives with his spouse, include the child's spouse in the child's MAGI household size.

b           If the child meets the criteria of being a qualifying child and lives with only one parent who claims the child on her tax return, the child's MAGI household is the same as the parent's MAGI household size with one addition:

o      If the child is married and also lives with his spouse, include the child's spouse in the child's MAGI household size.

c            If the child meets the criteria of a being a qualifying child and lives with two parents, but the parents will not file a joint tax return, then the MAGI household size of that child will follow non-tax filer rules (230-3).

d           A child could live with two biological (or adoptive) parents and a step-parent (someone married to one of the biological parents). In this case, the biological parents will not be filing a joint return. Determine the child’s MAGI household following non-tax filer rules.

e           If the child meets the criteria of a being a qualifying child and lives with one parent, but a non-custodial parent will claim the child on his or her tax return, then the MAGI household size of the child will follow non-tax filer rules (230-3).

D          Child Applicant

A child who meets the age criteria to be a qualifying child of a tax filer may apply for CHIP on her own if she does not live with her parents.  If she expects to be permanently absent from her parents’ home, the agency will not consider her as her parents’ tax dependent to determine her eligibility.

a           If she expects to file her own tax return, use the applicable rules to build her MAGI household. 

o      If she expects to file her own tax return, use tax filer rules.

o      If she does not expect to file her own tax return, use non-tax filer rules (230-3).

b           Only count the clients income and that of anyone who is included in their MAGI household if applicable.  

E           MAGI household for other dependents of a tax filer

To determine the MAGI household size of someone claimed as a dependent of a tax filer who is not the spouse or dependent child of the filer, follow the rules for non-tax filers.  Other dependents include a qualifying child who is not the tax filer's child or qualifying relative.  This includes a child placed for adoption before the adoption is finalized.  Utah Code does not recognize the adopting parent as a legal parent until the process is complete.  Therefore, we will treat the dependent as a not tax filer (230-3).