Medical Expenses: Are Loans Counted As Income?

Whether a loan counts as income for medical purposes depends on the type of loan and the specific medical program. For example, in the United States, Social Security considers the money from a loan as an asset rather than income if it is still held in the month following its receipt. However, if the loan is not considered a bona fide agreement, then the money is counted as income. Additionally, federal education loans, such as Parent PLUS, Perkins, or Stafford loans, are not counted as income or resources. In the context of Medical Assistance for people aged 65 or older, blind, or with disabilities (MA-ABD), loans are considered unearned income. On the other hand, certain income types are no longer counted towards Medicaid eligibility, including child support, veterans' benefits, workers' compensation, gifts, inheritances, and Temporary Assistance for Needy Families (TANF) payments.

Loans are counted as income for SSI eligibility

Loans can be counted as income for SSI eligibility, and this can affect your eligibility for SSI benefits or your payment amount. SSI, or Supplemental Security Income, is a federal benefit that is only available to seniors and people with disabilities who have low incomes and few assets or resources. The Social Security Administration (SSA) has specific rules for different types of loans when it comes to SSI eligibility and benefits.

For a loan to be considered a bona fide agreement, it must be made in good faith and be enforceable under state law, meaning the borrower can be sued if they do not pay it back. This applies whether the loan is oral or written and regardless of whether interest is charged. Federal education loans, such as Parent PLUS, Perkins, or Stafford loans, are not counted as income or resources (assets) by the SSA. Additionally, any other loan made under Title IV of the Higher Education Act is also excluded. Education-related resources, such as grants and scholarships, are also excluded as long as they are used for tuition and fees.

If you are the lender, the SSA may treat the loan you made and the loan payments you receive as assets or not, depending on the circumstances. For example, if you loan someone money under a bona fide loan agreement, the SSA will not consider the cash you receive in repayment as income. However, if the loan is negotiable (sellable), it can be considered a joint resource and will be counted as an asset. Generally, loans are considered negotiable unless there is a legal bar to selling the loan or it is illegal.

The amount of income you can have and still qualify for SSI is based on the "federal benefit rate" (FBR), which changes annually. For 2025, the FBR is $967 per month for a single person. The SSA determines your SSI benefit amount by subtracting your countable income from the SSI Federal benefit rate. For example, if your gross wages are $317 and you have $20 of uncounted income and $65 of counted income, your countable income is $116. Subtracting this from the SSI Federal benefit rate of $943, your SSI Federal benefit is $827. If you are living alone, a state supplement of $15 may be added, bringing your total SSI benefit to $842.

Bona fide loans are counted as unearned income for MA eligibility

Bona fide loans are generally not considered income by the Social Security Administration. However, there are certain circumstances where loan proceeds may be counted as unearned income for MA eligibility.

The term "bona fide loan" refers to a loan that is made in good faith and is enforceable under state law. This means that the borrower can be sued if they fail to repay the loan. Social Security has specific rules for determining whether an informal loan, such as those between friends or family members, is considered bona fide. Firstly, there must be a loan agreement in place before the lender gives the borrower cash. Secondly, both the borrower and the lender must acknowledge that the loan needs to be repaid. Lastly, the loan must include a workable repayment plan that is feasible given the borrower's income and resources.

If you lend someone money and collect interest on the loan, Social Security will consider the interest payments as unearned income. In this case, only the interest portion of the payments will be counted as income, while the principal amount will not. To prove that the cash is a bona fide loan, you may need to provide a copy of the written and signed loan agreement or statements from both parties acknowledging the loan.

When determining MA eligibility, certain types of income must be considered. This includes unearned income, which is money received without performing work or service. Examples of unearned income include child support payments, interest and dividends, and rental income. Earned income, on the other hand, refers to cash received in exchange for work or service, such as employment or self-employment. It's important to note that income from bona fide loans may be treated differently depending on the specific MA program and its guidelines.

In addition to income, MA eligibility may also consider assets. Social Security will consider any cash you have from a loan in the month after you receive it as an asset. This includes loans from banks or commercial lenders. However, federal education loans, such as Parent PLUS, Perkins, or Stafford loans, are not counted as income or resources. Other education-related resources, such as grants and scholarships, are also excluded as long as they are used for tuition and fees.

Social Security may treat informal cash loans as income

In the United States, Social Security treats loans differently depending on the type of loan and the purpose for which the loan is used. For instance, federal education loans (e.g. parent PLUS, Perkins, or Stafford loans) are not counted as income or resources (assets) by Social Security. Similarly, other education-related resources such as grants are excluded as long as they are used for tuition and fees.

Social Security also has special rules for informal loans (e.g. between friends or family members). For Social Security to consider an informal loan as a "bona fide" loan, several conditions must be met. Firstly, there must be a loan agreement in place before the exchange of cash, with both the borrower and lender acknowledging the loan's repayment. The loan agreement must also include a workable plan or schedule for repayment, which Social Security will determine as feasible given the borrower's income and resources. Lastly, the borrower must express their intent to repay the loan using future income or assets.

If these conditions are not satisfied, Social Security may treat the informal cash loan as income or an asset. This classification can impact an individual's eligibility for Supplemental Security Income (SSI) or other benefits. It is important to note that any loan proceeds received while collecting SSI benefits that are not spent could be counted against the individual, potentially reducing their benefits.

In the context of medical assistance, such as Medical Assistance for People Who Are Age 65 or Older and People Who Are Blind or Have a Disability (MA-ABD), Social Security uses the methodology of the SSI program to determine countable income. Therefore, the treatment of informal cash loans as income or assets by Social Security can have implications for an individual's eligibility for medical assistance programs.

Loans are counted as income for Medicaid eligibility

Loans can be counted as income for Medicaid eligibility, depending on the type of loan and the specific circumstances.

When determining eligibility for Medicaid, the Modified Adjusted Gross Income (MAGI) methodology is used. This includes not only adjusted gross income (AGI) but also untaxed foreign income, non-taxable Social Security benefits, and tax-exempt interest. It is important to note that while certain income sources may be excluded from MAGI, loans are generally not considered among those exclusions.

Proceeds from loans, such as student loans, home equity loans, or bank loans, are considered income for Medicaid eligibility. This means that any money received from these loans will likely be included in the calculation of an individual's or household's total income when determining eligibility for Medicaid.

However, it is important to distinguish between different types of loans and their treatment under Medicaid guidelines. Bona fide loans, including student loans, are considered "unearned income" for Medicaid eligibility. This means that the loan itself is not counted as income, but any interest or returns generated from the loan may be counted. On the other hand, informal cash loans from individuals or non-commercial lenders may be treated differently. Social Security guidelines, for instance, dictate that such loans may be treated as income, assets, or neither, depending on the specific circumstances.

It is worth noting that the treatment of loans as income for Medicaid eligibility can vary across different states and jurisdictions. Additionally, the income limits and eligibility criteria for Medicaid may change over time, so it is always advisable to refer to the most up-to-date guidelines and seek guidance from official sources or qualified professionals.

Loans are counted as income for premium tax credit eligibility

Eligibility for the premium tax credit is based on your Modified Adjusted Gross Income (MAGI). MAGI is your adjusted gross income (AGI) plus any untaxed foreign income, non-taxable Social Security benefits, and tax-exempt interest. It is important to note that Supplemental Security Income (SSI) is not included in MAGI.

When determining eligibility for the premium tax credit, the Marketplace will consider the estimated income of all household members. This includes income from various sources, such as federal taxable wages, gross income, interest and dividends earned on investments, rental income, IRA and 401k withdrawals, business income, and Social Security income.

While loans are not specifically mentioned as a type of income included in MAGI, certain types of loans may be considered as income when determining eligibility for the premium tax credit. For example, bona fide loans, including student loans, are considered unearned income for MA eligibility in some states. Additionally, any interest or dividends earned on investments, including loan proceeds invested, would be included in MAGI.

It is important to refer to the guidelines provided by the Internal Revenue Service (IRS) and the specific rules and regulations for the tax year in question to determine the exact treatment of loans as income for premium tax credit eligibility.

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