1. IS IT SAFE TO SAVE MY TAX REFUND? A Training on Educating Tax Filers About the Impact of Savings on Eligibility for Public Benefits Prepared by the Center for Public Policy Priorities (p): 512-320-2222; (f): 512-320-0227; www@cppp.org www@cppp.org

2. Overview of Training The Big Picture What Are Asset Limits in Public Benefits? Types of Savings: What Counts and What is Exempt From Asset Limits? When Does the EITC Count Toward Asset Limits? How do I Educate Tax Filers About “Saving Safely”?

3. The Big Picture # 1 Under certain circumstances, families can save their tax refunds and still receive public benefits. #2 Families need to be aware that certain savings, depending on the type and amount, may cause them to lose benefits or become ineligible for benefits. #3 The rules about assets – what counts and what doesn’t – vary by program, so tax filers should not be automatically discouraged from saving their tax refunds for fear they will lose benefits.

4. The Big Picture #4You do not need to be an expert: this training is intended to give VITA site volunteers basic information about the interaction between savings and public benefits. #5If you are unsure of how to answer a tax filer’s question, refer him/her to CPPP or to a local benefits office. (www.yourtexasbenefits.com/)

5. Why is this important? Many families don’t save their tax refunds for fear they will lose important benefits. Low-income families should be saving for the future and need to learn how to protect these savings and their benefits. VITA sites can help families understand the rules and encourage them to save in a way that won’t harm them.

6. What are “Asset Limits”? An “asset test” or limit is the total value of countable resources (savings and other assets) a family may have and still be eligible for public benefits. Each public benefit has a different asset limit ($$) and different “exemptions” (i.e., assets that are not counted). This training covers the asset rules for Food Stamps, Temporary Assistance for Needy Families (TANF), Family Medicaid, Child Care, and the Children’s Health Insurance Program (CHIP).

7. Asset Limits – All Programs Counted Most liquid assets (i.e., checking/savings accounts, or cash on hand) $$ limits vary by program The value of certain vehicles – varies by program Not Counted A family’s primary home, surrounding property, and personal effects Individual Development Accounts (IDAs) Texas Tomorrow Funds* 401Ks *The TTF is currently closed to new enrollment, but will reopen in October 2008. Asset rules are set by federal and/or state law and policy.

8. Asset Limits at a Glance ProgramResource LimitVehicle rule TANF$1,000$4,650 of each car exempted; excess value over these amounts counted toward $1,000 limit Food Stamps$5,000$15,000 of first car exempted; $4,650 of each additional car exempted; excess value over these amounts counted toward $5,000 limit Family Medicaid (No asset test for pregnant women, infants<1, and Emergency Medicaid) $2,000; $3,000 if household includes elderly or disabled member First car exempted; $4,650 of each additional car exempted; excess value over these amounts counted toward $2,000/$3,000 limit CHIP (Only for families with income above 150% of poverty) $10,000First car exempted; $18,000 of second car exempted; and $7,500 of any additional vehicles. Excess value over these amounts is counted toward $10,000 limit Child Care (not related to TANF) No asset test

9. Asset Treatment at a Glance AssetFood Stamps/Family Medicaid/TANF CHIP IRA/Keogh Plan/SEP IRA CountedNot Counted 401KNot Counted IDAsNot Counted Unspent EITC refunds (Encourage families to retain proof of EITC refunds) Applicants: Exempt in the month of receipt and following month; any unspent amount is counted starting in the 3 rd month Recipients: Exempt in the month of receipt and following 11 months; after that any unspent amount would be counted Unspent Child Tax Credit Exempt in the month of receipt and following month Texas Tomorrow Fund*Not Counted 529 plans*CountedNot Counted *See https://www.texascollegesavings.com/ for more information.https://www.texascollegesavings.com/

10. The EITC & Public Benefits The EITC is not counted as income when determining a family’s eligibility. The EITC may be counted as a resource, but the rules are different for applicants and recipients (see chart on p.). When a person spends the refund immediately, it is not counted. If a person deposits the refund in a savings account that is exempt from a program’s asset test, then it is not counted (see chart). Because asset limits & exemptions vary by program, a family’s decision to save its EITC refund could affect its eligibility for one benefit, but not another.

11. EITC Example Will the family lose: Mom’s Medicaid? No, because there is no asset test in Medicaid for pregnant women. Children’s Medicaid? It would not affect child #1, because there is no asset test for children under the age of 1. Child #2 would lose Medicaid, because the asset limit for Medicaid is $2,000; however, the child would be transferred to CHIP, which has a higher ($10,000) resource limit. Food Stamps? No. If mom deposits the money in her savings account, bringing the balance to $2,100, the family would not lose Food Stamps, because the asset limit is $5,000. (Note: remember that even if the refund did cause a family’s savings to go over the $5K limit, unspent EITC refunds are not counted for 12 months.) #1: A family of three (mom and two kids) receives a $2,000 EITC refund and puts it in a savings account. Mom is pregnant. Child # 1 is 6 months. Child #2 is 7 years old. The family has $100 in savings. The family is on Food Stamps. Mom receives Medicaid. The children receive Medicaid.

12. EITC Example If mom decides to save her refund, will the family lose: TANF? Yes, because the resource limit for TANF is $1,000. Child care? No. When mom loses TANF, she will automatically receive transitional child care benefits, which have no asset test. Children’s Medicaid? No, because the asset limit for Medicaid is $2,000. Food Stamps? No, because the asset limit is $5,000. Note: This mom should be encouraged to open a Texas Tomorrow Fund for her child, because it would increase her child’s chances of being able to afford college and prevent her EITC refund from counting against her in the future, in the event she saves more than is allowed under the Medicaid, CHIP or Food Stamp limits. #2: A family of two (mom and one kid) receives a $1,500 EITC refund. They have no savings, but mom is afraid to save the money for fear of losing benefits. Mom is on TANF and just got a job. She gets subsidized child care through TANF so she can work, the children receive Medicaid, and the family gets Food Stamps.

13. Recap Savings, depending on the type and amount, may cause a family to lose benefits in certain situations. Asset limits and exemptions vary by program, so a person should not be automatically discouraged from saving their tax refund for fear they will lose benefits. A family should never be discouraged from filing for the EITC. EITC refunds are not counted as income, and if a family spends their refund immediately, it is not counted as a resource. If you are unsure of how a family’s refund will affect them, refer them to a local benefits office or call CPPP.

14. Resources For information about public benefit rules: The Center for Public Policy Priorities – www.cppp.orgwww.cppp.org Contact: Celia Hagert, (512) 320-0222 x110 or hagert@cppp.orghagert@cppp.org For information about savings options for low-income families: The Texas College Savings Plan - https://www.texascollegesavings.com/ https://www.texascollegesavings.com/ RAISE Texas (formerly the Texas Asset Building Coalition) – http://www.covenantcapital.org/html/publicpolicy/idanetwork.html http://www.covenantcapital.org/html/publicpolicy/idanetwork.html Contact: Woody Widrow, (512) 477-4431 x129 or widrro@consumer.org; or Don Baylor (512) 320-0222 x108 or baylor@cppp.org widrro@consumer.org baylor@cppp.org To find a local benefits office: www.yourtexasbenefits.com/

15. Use of This Presentation The Center for Public Policy Priorities encourages you to reproduce and distribute these slides, which were developed for use in making public presentations. If you reproduce these slides, please give appropriate credit to CPPP. The data presented here may become outdated. For the most recent information or to sign up for our free E-Mail Updates, visit www.cppp.org.www.cppp.org © CPPP Center for Public Policy Priorities 900 Lydia Street Austin, TX 78702 P 512/320-0222 F 512/320-0227