Tax refunds can put some extra money in your bank account. But can anyone else, like Medicaid, take it away from you if you owe them money?

That’s what you’ll find out below.

A tax refund is money owed to people by the government, whether state or federal. You get a tax refund if you’ve overpaid on your taxes during the year.

If you get a refund, then you can use it for anything you want… paying off debt, getting you or a loved one a special something or just putting it in the bank for a rainy day.  

But what if you have debts owed to Medicaid? For instance, you may have unpaid premiums or other out-of-pocket costs. This leads to people asking “Can Medicaid take my tax refund?”

Today, we will share whether or not Medicaid takes a portion of your tax refunds to pay for any acquired debts.

Can Medicaid Take My Tax Refund?

Whether or not Medicaid can take your tax refund depends on the circumstance. Let’s dig into what this means for you.

There are two types of tax refunds in the United States: Federal Income Tax Refunds and State Income Tax Refunds. 

Whether Medicaid will take your income tax refunds will depend on the type of income tax refund(s) you will be receiving. As many of us know, rules and guidelines for Medicaid differ depending on the state. 

As for Federal Income Tax Refunds, Medicaid doesn’t consider them as income. Every state with Medicaid must adhere to the Unemployment Insurance Reauthorization and Job Creation Act’s 2010 Tax Relief. 

Medicaid does not count federal income tax refunds as assets in the 12-month period following the receipt of money. However, if the money is not spent within that period, then the remainder of that money will count towards Medicaid’s asset limit.

In most states that have Medicaid, the Medicaid asset limit is up to $2,000. But things are a little different when it comes to the State Income Tax Refunds. 

Medicaid and State Tax Refunds

The 2010 Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act do not extend to state income tax refunds. The truth is, how Medicaid sees state income tax refunds differs on a state-by-state basis.

If your state has Medicaid and it treats state income tax refunds similarly to federal tax income tax refunds, then most likely, Medicaid will also do the same. 

But to those who are new to taxes and do not know Medicaid, here is a brief explanation to help you understand. 

For starters, what is a tax refund? A tax refund is reimbursement by either the federal government or state government to a taxpayer who has paid excessive amounts of tax to the government. 

Or, for better understanding, tax refunds are basically what the state or federal government owes you for overpaid taxes. That is pretty much a basic explanation of tax refunds. 

With that said, let us go over what Medicaid is. Medicaid is a health insurance program sponsored by both the state and the federal government that provides coverage for those who are eligible to have them. 

Eligible beneficiaries for Medicaid include low-income adults, children, pregnant women, seniors, and people with disabilities. So that is the basics of Medicaid as well. 

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