PM 08-03-02-b: MAGI Non-Exempt Unearned Income

The following Unearned Income Types are counted under MAGI Budgeting.

Income Type Description
Alimony/spousal support received new textPayments to or for a spouse or former spouse under a divorce or separation agreement executed prior to 12/31/18 are allowable deductions. If the divorce or separation agreements is executed or modified after 12/31/18 the alimony payments are not deductible. It does not include voluntary payments that are not made under a divorce or separation instrument.
American Indian Gaming proceeds Money distributed by a federally recognized Indian tribe to its  members based on revenue produced by gaming on the reservation.
Capital/other gain (or loss)
  • When a capital asset is sold, the difference between the amount it is sold for and the basis, which is usually the purchase price, is a capital gain or a capital loss.
  • A capital asset is an asset that has a useful life longer than one year and is not intended for sale during the normal course of business, such as buildings, land or major equipment
  • A capital loss can be deducted for investment property only, not on property held for personal use.
  • Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040. 
Dividends A dividend is a payment made by a corporation to its shareholders.
Education Benefits (not used for education purposes) Portion of scholarships, awards or fellowship grants used for living expenses and not used for educational purposes
Interest (taxable and non taxable) Interest income is a return on capital investments such as on loans, savings accounts or checking accounts.
IRA distributions (taxable amount only) Withdrawals from an Individual Retirement Arrangement (IRA).
Other income if taxable Such as, prizes, jury duty pay not given to employer, etc.
Pensions and annuities Pensions are payments based on a person's past employment. Annuities are fixed payments received for a person's lifetime or a specified number of years from the investment of a person's income or resources.
Railroad Retirement Benefits

Includes Tier 1, Tier 2 and any supplemental annuity benefits.

Note: Although Tier 1 benefits are not taxable, they are considered the same as nontaxable SSA benefits and are counted under MAGI.


Compensation for the use of property, such as copyrighted works, patented inventions, or natural resources.

Royalties received as an investment dividend or from a lease agreement (i.e., royalties paid to the owner of a mine, oil well, etc.) are considered unearned income, unless the payment represents net earnings from self-employment.

Social Security (SSA) income

SSA benefits refer to these three types of benefits that the Social Security Administration pays: Retirement, Survivors, and Disability Insurance (RSDI).

new textNote: In some situations the SSA income of a child or tax dependent of another person in the EDG is not counted. Refer to PM 15-06-01-h to determine if the child or tax dependent's income is counted.

Taxable state income tax refunds and credits

State or local tax refunds are taxable if the person claimed the tax as an itemized deduction in the prior year.

If the person claimed the standard deduction on their federal tax return last year, the state tax refund is not taxable.

Unemployment Compensation Insurance benefits paid by the state or federal government to individuals who are involuntarily out of work.