The following Unearned Income Types are exempt under MAGI Budgeting.
Borrower: Monies received by the borrower that must be paid back to the lender are loans. Loans are exempt because they have to be repaid. This includes student loans and cash advances from a credit card that must be paid back.
Lender: The part of payment received toward the principal of the loan is exempt. Interest paid on the loan is counted as unearned income.
Compensation for Physical Injury is Generally Exempt
Federal tax law excludes damages received as a result of personal physical injuries or physical sickness from a taxpayer's gross income.
Exceptions to the General Rule
Income received due to an occupational sickness or injury if paid under a workers' compensation act or a statute in the nature of a workers' compensation act.
Note: If a disability pension is paid under a statute that provides benefits only to employees with service-connected disabilities (such as a Firefighter or Police Officer 'Line of Duty' pension) it may be exempt as workers' compensation. The rest of the pension, based on years of service, is not exempt.
Illinois Department of Human ServicesJB Pritzker, Governor · Grace B. Hou, Secretary
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