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How Does Receiving Medicaid Benefits Affect My Tax Return?

Medicaid benefits do not affect a person’s tax return. Most people who apply for Medicaid or need it on a long-term basis do not need to file an income tax return. A problem might arise when an individual claims another relative on his taxes as a dependent. The benefits are still tax-free to the individual, but another person’s dependent status on a caretaker’s tax return may change depending on the amount of Medicaid benefits the relative claimed as a dependent receives.

How Medicaid Might Affect Your Tax Returns

A caretaker must track the dollar value for the Medicaid services the child or elderly child receives while in the program. If the amount exceeds more than half of the individual’s support, the relative can no longer claim the individual as a dependent. The rules for children differ slightly from a relative over the age of majority than they do for a minor. Minors can continue to be claimed as a dependent on a person’s taxes until they reach the age of 18. Federal law allow a parent to write tuition off on a parent’s taxes. The parent does not need to worry if the child applies for Medicaid where he goes to college.

How Else Medicaid Benefits Might Affect Your Tax Returns

There are few other ways in which a person receiving benefits might affect an individual’s tax returns. The reverse is more likely to be true. A person’s tax returns may affect a person’s Medicaid eligibility. It is the responsibility of the recipient to report any changes to the office. A state department of public welfare can request a person’s tax return if they suspect that a person is not reporting their income. An income tax returns that shows a person’s ineligibility will cause that person to lose Medicaid benefits.



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