ARRA provides for a Making Work Pay Tax Credit of up to $400 per year, for 2009, and
2010 (up to $800 per year for joint tax returns).
This tax credit is provided to working individuals by reducing the amount of income
tax withholding that is deducted from their pay checks.
The increase in take home pay that results from the tax credit is not counted as a
resource in the month it is received, and is excluded from resources for the following
It is not feasible to determine the actual amount an individual receives each month
from this tax credit. Therefore, for purposes of determining the excludable resource
amount for the Medicare Part D Extra Help, we assume that the individual receives
$35 per month from the Making Work Pay Tax Credit for each month a paycheck was received.
We assume that a married couple receives $70 per month from the tax credit for each
month that both members of the couple received wages.
If the individual or spouse has more than one employer, assume that the tax credit
is $35 per employer per month. For example, if the individual has two jobs and the
spouse has one job, the excludable amount of resources would be $105 per month (3
For purposes of applying this exclusion, assume that the tax credit has been retained
when determining the individual’s resources. Therefore, it is not necessary to ask
the individual if these funds have been retained.
It is not necessary to develop this exclusion, unless the resources of the individual
or couple are over either the lower or higher resource limit for Medicare Part D Extra
Individuals who have very low wages may not receive their tax credit through an increase
in their take home pay. Self-employed individuals will not receive the tax credit
in take home pay. These individuals can get the tax credit as part of their tax refund
when they file their income tax returns for 2009, and 2010. If the tax credit is received
in their tax refund, it is excluded from resources for the month of receipt, and the
following 2 months. If the individual also received the $250 economic recovery payment,
the tax credit is reduced by that amount. To determine the excluded amount, ask the
individual for the amount of the tax credit he or she received and exclude the tax
credit for the month of receipt, and the following 2 months.
EXAMPLE: Mr. Smith files for Medicare Part D Extra Help in June 2009. On his application he
alleges wages in 2009, and reports no stop date for working. His alleged resources
are $6,680, which is over the 2009 lower limit of $6,600. Because his resources are
over the limit and Mr. Smith has wages, the CR develops the resource exclusion for
the Making Work Pay Tax Credit. The amount of money in his pay checks that is due
to the tax credit is not countable as a resource, for the month it is received, and
the following 2 months. Mr. Smith did not allege a stop date for work on his application,
so we assume that he got paid in all months and received the tax credit in his pay
checks in April, May, and June. Therefore, in June 2009, we would exclude $105 from
resources ($35 for April, $35 for May, and $35 for June), which brings his countable
resources below the $6,600 lower limit.
EXAMPLE: Ms. Wilson, who receives T2 benefits and is self-employed, files for Medicare Part
D Extra Help in June 2010. Based on her 2009 federal income tax return, she receives
a $150 Making Work Pay tax credit, as part of her refund in April 2010. Because she
also received the $250 economic recovery payment, the full $400 tax credit is reduced
by $250. The $150 tax credit she received is not countable as a resource in April
2010, when she received the refund and is excluded from resources in May and June
2010, for purposes of determining Medicare Part D Extra Help eligibility.