The Income Test

The Income Test  The household income of the veteran or the surviving spouse cannot exceed the Maximum Allowable Pension Rate (MAPR) for that category of application. (We list 9 categories of pension income applications in the section on how pension is calculated.)  As an example, a husband and spouse with no medical rating cannot have a combined income of more than $1,220 a month or $15,493 a year from all sources. As another example, a single surviving spouse with an "aid and attendance" medical rating cannot make more than $956 a month or $12,144 a year from all sources.

If a potential applicant were to call a local regional office, the Veterans Service Representative (VSR) on the phone would typically ask about the amount of household income, the amount of assets and the medical status. The VSR would check his or her table similar to ours below and if the household income exceeds the MAPR for that particular type of application category, the person calling the office would probably be told there is no benefit.   In many cases this is simply not true.  Keep in mind, however, some VSR's are aware of the special medical deduction and may not discourage callers in cases such as these.

The household income can be reduced to meet the Pension income test under the special conditions we have mentioned above.  This allows households earning $2,000 to $6,000 or more a month to qualify even though their current non-adjusted income does not meet the income test. 

Let's use an example to show how this works.  Suppose a veteran and spouse earn $4,000 a month.  They do not meet the income test of making less than $1,220 a month or $14,643 a year for this particular MAPR.  However, VA will allow the household income to be reduced by any un-reimbursed medical expenses that are incurred in the month of application or any expenses that recur regularly over the coming 12 months.  A good example of a recurring expense is the cost of medical insurance such as Medicare Part B ($96.40 a month)

In this example, VA will take all sources of income over the next 12 months and add them together.  Assume that the only source of income is the recurring $4,000 a month from Social Security and retirement pensions.  In this case, VA uses $48,000 as the starting point for the income test.  Next, medical expenses are added up.  The family reports $500 of medical expenses in the month of application and $192.80 (the amount both are paying) a month for un-reimbursed Medicare Part B premiums. The veteran is also in an assisted living facility and is paying $3,500 a month for this care which is also un-reimbursed. Payment for assisted living is coming from savings and income.  Only recurring medical expenses can be deducted and the assisted living facility reports that medical services from the assisted living personnel are $200 a month. The rest of the cost is for room and board. Assisted living medical expenses amount to $2,400 a year.

All medical expenses in the month of application and those that are expected to recur every month over the next 12 months (beginning on the first day of the month following the month of application) are added together and they total $5,213.60.  Next, VA subtracts a deductible equal to 5% of the basic MAPR which is $732.  After the deduction, the allowable medical expense now totals $4,481.60.  This amount is subtracted from the $48,000 prospective 12-month income in order to arrive at a new income called "countable" income or IVAP.  This new income will be used for the income test.  It is obvious this $4,481.60 of medical expense will not bring the household countable income below $14,643 a year to pass the income test.

Before we give up with this example, we need to make you aware there is a special provision in the rules that allows all of the veteran's costs for assisted living to be counted as deductible medical expenses.  This has to do with a so-called "rating." We won't go into the necessary evidence or paperwork required for a rating but assuming our veteran gets this rating, he can now count his entire cost of assisted living or $42,000 towards determination of his income test. In this example, his rating is for "aid and attendance" and he gets an additional allowance that increases the family MAPR up to $22,113. 

Along with his other medical expenses he can now use $46,881.60 towards his medical expenses — adjusted for the deductible. Subtracting that amount from his $48,000 of income he now has a countable income of $3,745.40 which puts him well below the MAPR of $22,113.  Subtracting the countable income from MAPR gives him an award from VA of $20,994.60 or $1,749 a month in additional income.  This is on top of the income he is already making and will help cover the cost of his assisted living.

This special provision for annualizing and deducting non-medical costs associated with a rating also applies to home care costs. Home care costs can include the costs of professional aides or money paid to members of the family (not including the spouse), friends or people hired independently to provide care in the home. The special provision also applies to the non-veteran spouse receiving assisted-living care or home care but in this case there is no rating.  Another special rule allows the spouse to deduct non-medical costs associated with medical care for determining countable family income.

fniemann@hnlawfirm.com

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New Jersey Veterans Benefit Lawyer