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Tax Refunds, Earned IncomeTax Credits (EITC/EIC) and Benefits

 

Did you file your taxes and get money back? Congratulations! Let’s figure out how to make the most of that money.

The good news is that getting a tax refund or Earned Income Tax Credit (EITC/EIC) usually will not lower or stop your SNAP/Food Stamps or TAFDC.

The Department of Transitional Assistance (DTA) looks at how much money you have when they decide how much SNAP/Food Stamps or TAFDC you can get.

Keep reading to learn how DTA counts your EITC money and your tax refund.

  1. TAFDC and EITC/EIC
  2. SNAP and EITC/EIC
  3. TAFDC and your tax refund that is not EITC/EIC and
  4. SNAP and your tax refund that is not EITC/EIC.

1. Do I have to tell DTA I got a tax refund or Earned Income Tax Credit (EITC/EIC)?

To be safe, you should report your tax refund or EITC/EIC to DTA. If you do not report a tax refund or EITC/EIC, you may have problems with DTA. The Division of Revenue (DOR) shares tax information with DTA.

In most cases, your tax refund or EITC/EIC will not hurt your SNAP/Food Stamps and TAFDC benefits.

2. I filed my taxes and got money back. How can I tell EITC money apart from a tax refund?

You may get a tax refund and EITC from the federal government, the Internal Revenue Service (IRS). You may also get a tax refund and EIC from Massachusetts' Department of Revenue (DOR). You may get money from both the IRS and the DOR. Your federal and Massachusetts refunds come as separate checks or deposits into your bank account.

You can tell how much of your refund is an EITC/EIC by looking at your federal and state tax returns. The EITC/EIC is on a separate line from the rest of your tax refund.

3. Does my Earned Income Tax Credit count against my TAFDC benefits?

If you spend all of your federal and state EITC/EIC money in the first two months after you get it, your TAFDC payment will not change.

If you save any of your federal EITC or state EIC and still have some left in the third month after you get it, DTA will count the left-over EITC/EIC as an “asset”. You can have a total of up to $2,500 in “assets,” counting all your “assets” together, and still keep getting the same amount of TAFDC. But if your total “assets” or savings go over $2,500, your TAFDC will stop. You will not be able to get TAFDC again until your assets drop back to $2,500 or less.

Example 1

Missy’s family gets TAFDC. She gets $3,000 in EITC on April 23.

Missy’s EITC does not count against her TAFDC for  the 1st month(April) or the 2nd month (May).

But whatever EITC Missy has saved into the 3rd month (June) counts as an “asset”. Missy has $300 of her EITC left by the 3rd month (June). She does not have any other assets, so all of her assets together add up to only $300. Missy can have up to $2,500 and still get TAFDC. Missy’s EITC doesn’t change her TAFDC at all.

Example 2

Jared’s family gets TAFDC. Jared gets $4,000 in EITC on May 15. Jared decides to save the $4,000 EITC to buy a car.

Jared’s EITC does not count against his TAFDC for the 1st month (May) or the 2nd month (June) after he gets the EITC.

Starting in the third month, Jared’s saved EITC counts as an “asset”. At the beginning of the 3rd month (July), Jared still has $4,000 in EITC. This is more than the $2,500 "asset limit" for TAFDC. Jared’s TAFDC stops because he is over the asset limit.

Note: A car is treated as a special kind of asset

There are special rules for counting a car as an asset. The first $5,000 of “equity value” (how much of the car you and not the bank owns) does not count as an asset. The first $10,000 of “fair market value” (how much the car sells for) also does not count as an asset.

If you are saving your EITC/EIC to buy a car, talk to a legal services advocate.

4. Does my EITC/EIC count against my SNAP/Food Stamps benefits?

SNAP/Food Stamps are now called SNAP benefits.

If you spend all of your federal EITC or state EIC in the first two months after you get it, your SNAP benefits will not change.

If you save any of your federal EITC or state EIC, and you still have EITC/EIC money left over in the third month after you get it, DTA may count your EITC/EIC savings as an “asset.”

For most people, assets don’t matter for SNAP benefits. Your EITC/EIC money probably won’t change your SNAP benefits.

But if you fit into two groups of people, you do have an asset limit for SNAP benefits:

  1. If someone in your household cannot get SNAP benefits because he or she broke a Food Stamps work rule or a SNAP/Food Stamps or TAFDC reporting rule, you have an asset limit of $2,000. You cannot have more than $2,000 in assets (savings and certain property) and still get SNAP benefits.
  2. If you are over 60 or you are disabled, you can get SNAP benefits even if your income is over the limit. But if your income is more than $1,805/month for 1 person or $2,428/month for two people, you have a $3,000 asset limit. Look at a chart for larger households.

If you fit into one of these two groups, you may want to spend most of your EITC/EIC in the first 2 months after you get it. If you have any EITC/EIC saved at the beginning of the 3rd month, it will count as an asset for SNAP benefits. If your total assets go over your asset limit, you may not be able to get SNAP benefits until your assets drop to the asset limit or less again.

Example 1

Jack and Jill get SNAP benefits together on one grant.

Jack and Jill have not broken any food stamps rules.

Jack and Jill are both over 60 and Jill is disabled.Their income is less than $2,428/month so they do not have an "asset limit".

In April, they get an EITC payment of $4,000. Their SNAP benefits will not change. They can save their EITC/EIC as long as they want. They will keep getting SNAP.

Example 2

Beverly is 65 and her income is $1,900 each month. She gets SNAP benefits because her rent is very high. Because Beverly is a senior and her income is above $1,805/month, her assets count for SNAP/Food Stamps. She has an asset limit of $3,000.

Beverly gets an EITC payment of $3,500 in May. The payment does not count in the 1st month (May) or 2nd month (June).

At the beginning of the 3rd month (July), Beverly still has the $3,500 EITC. Beverly’s EITC counts as an asset starting in the third month. The $3,500 EITC Beverly has at the beginning of the 3rd month is more than the $3,000 asset limit, so her Food Stamps/SNAP will stop. She can reapply for Food Stamps/SNAP after her assets drop to $3,000 or less.

5. Will my tax refund (not EITC/EIC) count against my TAFDC?

DTA counts your tax refund that is not EITC/EIC as an “asset.” An asset is savings in the bank or certain property you own. An "asset limit" is the amount of assets you can have before your TAFDC stops. The asset limit for TAFDC is $2,500. If you get a tax refund that is not EITC/EIC and you end up with more than $2,500 counting all your assets, your TAFDC will stop. You can apply again for TAFDC later, after your assets drop to $2,500 or less.

Example 1

Tim and his family get TAFDC. Tim gets a $2,500 tax refund that is not an EITC payment. The $2,500 counts as an asset right away. Tim does not have any other assets (money in the bank or other property). He is not over the $2,500 asset limit, so the tax refund does not change his TAFDC.

Example 2

Lilly and her children get TAFDC. Lilly gets a tax refund that is not EITC money. Lilly’s tax refund is $2,000. Lilly already has $600 in the bank when she gets the refund. Once she gets the refund, she has $2,600. This is more than the $2,500 asset limit for TAFDC, so Lilly’s TAFDC benefits stop. Lilly can apply again for TAFDC later, once her assets drop to $2,500 or less.

6. I got a tax refund that is NOT an EITC/EIC payment. Will it affect my Food Stamps/SNAP benefits?

Food Stamps are now called SNAP benefits.

DTA counts your tax refund that is not EITC/EIC money as an “asset.” An asset is savings in the bank or certain property you own. An ‘asset limit’ is the amount of assets you can have before your SNAP benefits stop.

Assets do not matter for most people who get SNAP benefits. Your tax refund probably will not change your SNAP benefits.

You only have to worry about an asset limit for SNAP benefits if you fit into two groups of people:

  1. If someone in your household cannot get SNAP benefits because he or she broke a Food Stamps work rule or a SNAP/Food Stamps or TAFDC reporting rule you have an asset limit of $2,000. You cannot have more than $2,000 in assets (savings and certain property) and still get SNAP benefits.
  2. If you are over 60 or you are disabled, you can get SNAP benefits even if your income is over the limit. But if your income is more than $1,805 for 1 person or $2,428 for two people, you have a $3,000 asset limit. Look at a chart for larger households.

If you fit into one of these two groups and you get a tax refund that is not EITC/EIC money, the tax refund will count as an asset right away. If your assets go above your limit, your SNAP/Food Stamps may stop until your assets drop back below the limit.

Example 1

Julie and her sister Samantha live together and get SNAP on the same grant. They do not fall into either of the two groups that have an asset limit.

Julie gets a $3,000 tax refund and Samantha gets a $2,000 tax refund. The refunds are not EITC payments.

The refunds count as assets right away. But Julie and her sister do not have an asset limit for SNAP. So the refunds do not affect their SNAP benefits.

Example 2

Simon and Jazz get SNAP/Food Stamps, but Simon is off the SNAP/Food Stamp grant for an Intentional Program Violation (IPV). This means that they have an asset limit of $2,000.

Jazz gets a tax refund of $2,200. The refund is not an EITC payment. The refund counts as an asset right away and puts Simon and Jazz over their $2,000 asset limit. Their SNAP/Food Stamps benefits stop. They can start getting SNAP/Food Stamps again when their assets drop back to $2,000 or less.


TAFDC Food Stamps/SNAP
EITC/EIC Spend in first 2 months – no difference Spend in first 2 months – no difference
Tax Refund Counts as an asset Counts as an asset

Produced by Welfare Law Unit, Greater Boston Legal Services and MLRI
Last updated June 2009


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