08 Jan Will an ANCHOR benefit disqualify me from Medicaid?

Q. Is the ANCHOR benefit counted to possibly disqualify you for Medicaid purposes after it’s deposited into your checking account?
— Concerned

A. The ANCHOR payment is not considered income for New Jersey purposes.

But federal tax return is different.

The IRS calls payments like ANCHOR “recoveries,” which are detailed in IRS Publication 525. 

The IRS generally follows the “Tax Benefit Rule,” which says you must include a recovery in your income in the year you receive it up to the amount by which the deduction or credit reduced your tax in the earlier year.

The most common recoveries are refunds, rebates, and reimbursement of itemized deduction items such as property taxes.

But if a taxpayer takes the standard deduction rather than itemized deductions, the recovery would not affect the federal return.

Medicaid is based on what’s called your Modified Adjusted Gross Income, or MAGI.

“For many people, MAGI is identical or very close to adjusted gross income,” Healthcare.gov says. “MAGI doesn’t include Supplemental Security Income (SSI). MAGI doesn’t appear as a line on your tax return.”

Healthcare.gov details what’s included in your income:

Alimony from divorces and separations finalized before January 1, 2019

• Capital gains
• Excluded (untaxed) foreign income
• Federal taxable wages (from your job)
• Investment income
• Rental and royalty income
• Retirement or pension income
• Self-employment income
• Social Security
• Social Security Disability Income (SSDI)
• Tips
• Unemployment compensation

It also says not to count these items as income:

• Alimony for divorces and separations finalized on or after January 1, 2019
• Child support
• Child Tax Credit checks or deposits (from the IRS)
• Gifts
• Proceeds from loans (like student loans, home equity loans, or bank loans)
• Supplemental Security Income (SSI)
• Veterans’ disability payments
• Worker’s compensation

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This story was originally published in January 2025.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.