How to Compute Disposable Income

Computing Disposable Income
The maximum levels of income to qualify for each program are different. However, computation of disposable income is the same under both programs. The disposable income you received the year before you apply determines your eligibility for both programs. Disposable income includes all sources, whether or not they are taxable for federal income tax purposes. You may not deduct losses or depreciation. Some of the most common sources of income include:
  • Wages, salaries, and tips
  • Social Security benefits
  • Railroad retirement benefits
  • Pension and annuity receipts, including:
    • Retirement bonds
    • Individual Retirement Accounts
    • Distributions from Keogh plans.
    • An annuity is a payment of a fixed sum of money received at regular intervals. Some examples of annuity payments include:
      • Unemployment compensation
      • Disability pay payments
      • Welfare receipts (excluding amounts received for the care of dependent children)
  • Interest and dividend receipts
  • Business income. Depreciation and business losses may not be deducted
  • Rental income. Depreciation and rental losses may not be deducted
  • Capital gains
Retirees
If you were retired for 2 or more months of the preceding year, your household income will be computed by multiplying the average monthly disposable income received during the months you were retired by 12. If your spouse died before November one of the preceding year, your household income is computed by multiplying the average monthly disposable income, after the death of your spouse, by 12.