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New Legislation determines how tax refunds and credits are treated by other public benefit programs Back to news
Friday, March 11, 2011
As a reminder to both tax preparers who server low-income taxpayers and/or taxpayers with disabilities:

Legislation passed in December 2010 has greatly simplified and standardized the rules for how Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) refunds, as well as any tax refund, are treated in determining eligibility for other public benefit programs.

 

 

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312) was signed into law on December 17, 2010. The law includes a provision that disregards tax refunds received after December 31, 2009 as income and as resources (for a period of 12 months) in programs funded in whole or in part with federal funds, including those operated by States, localities, or others.

 

Under new law:

 

 

 

Income: The legislation excludes any federal tax refund from counting as income in determining eligibility, or the amount of benefit, for any federally-funded public benefit program. This includes state and local programs only partially funded by federal dollars. Tax refunds can include benefits from the EITC, CTC, or other refundable tax credits. Regardless of whether the tax refund is the result of a refundable credit, over-withholding, or both, the refund is not taken into account as income or as resources in the month received.

Resource test: The resource exclusion lasts for 12 months for all programs. The legislation also provides that refunds that are saved by the filer do not count against the resource limits of any federally-funded public benefit program for 12 months after the refund is received.

Programs Affected

Under the statute, tax refunds must be excluded from consideration as income in the month received and as a resource for 12 months in any program that is funded in whole or in part by federal funds. This includes all major means-tested programs that consider income and may consider assets when determining eligibility.

 

Under the statute, tax refunds must be excluded from consideration as income in the month received and as a resource for 12 months in any program that is funded in whole or in part by federal funds. This includes all major means-tested programs that consider income and may consider assets when determining eligibility.