If you receive SNAP, TANF, or another form of government assistance, you’re probably asking yourself the following question: Is EBT taxable income? The good news is that generally speaking, the answer is “no.” The primary forms of payments made from government entities to your EBT account are not considered taxable income. However, there are definitely exceptions, which means that you should know exactly where your EBT funds are coming from and how the government classifies the payments, as this will determine whether or not you have to pay taxes on them.
Before we look at exactly how the government taxes EBT income, it’s important to note that we are not accountants or tax professionals. If you’d like to seek out professional legal advice, feel free to consult our free legal aid directory!
Assistance Programs That Pay Out to EBT Accounts
It’s difficult to say whether or not all of the funds that land in your EBT account will be taxed. Why? Because numerous assistance programs can deliver benefits to your EBT card so that you can make purchases. That said, the two most common EBT programs are the Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF).
SNAP and TANF
Fortunately, neither the IRS nor individual state governments count SNAP or TANF as taxable income. This means that, if you get your EBT money from SNAP, TANF, or both, you don’t have to worry about paying taxes on those funds. Since the vast majority of EBT cardholders use SNAP and/or TANF, this means that the answer to “is EBT taxable income?” is usually no. But, as previously mentioned, there are exceptions.
The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) is an offshoot of the standard SNAP program that specifically helps low-income mothers and their children. Like SNAP, WIC benefits are paid out to your EBT card and are not classified as taxable income. Additionally, it’s important to remember that being enrolled in one program does not necessarily disqualify you from the other. This means that (depending on your income and the total benefits you’re receiving), you could be getting non-taxable income from both SNAP and WIC at the same time.
General Assistance programs often partner with the federal government’s electronic payment system to make sure that you can get the money you need quickly. This includes Unemployment Insurance (UI) or benefits paid out at the state or federal level. So, let’s say that you get a set amount each month in UI paid directly to your EBT account. Despite the fact that some money in your account (like funds acquired through SNAP) might be considered non-taxable income, funds acquired via the UI program are taxable. This means that you will need to keep records of all incoming UI payments so that you’re ready when tax season comes around.
It’s also important to note that, if you receive Unemployment Insurance, it could affect your ability to get other EBT funds through programs like SNAP. Since SNAP calculates how much you can receive based on your assets and monthly taxable income, your SNAP benefits could be greatly reduced if you start receiving UI benefits. If you go beyond the income threshold to qualify for SNAP, you could even lose your SNAP benefits entirely. So, not only will you need to pay taxes on your UI benefits, but these same benefits could also reduce your ability to qualify for non-taxable income like SNAP or TANF.
State General Assistance Programs
Unfortunately, things get a little trickier at the state level. Larger programs like SNAP or TANF adhere to the standard federal guidelines, which means that states cannot treat these funds as taxable income. However, smaller, state-run General Assistance (GA) programs can make their own rules about which kinds of state welfare are categorized as taxable or non-taxable income.
While every state offers some form of General Assistance, these programs can vary widely in how much they pay, who qualifies, and how the funds are classified (taxable or non-taxable). In many states, GA programs are designed to provide supplementary income to households that do not qualify for more targeted assistance. However, this doesn’t mean that they offer funds to all low-income households.
For example, New Mexico’s General Assistance program is specifically designed for disabled adults and children in need. The funds are deposited into an EBT account and can be used for everyday purchases like food, clothing, transportation, and housing. According to the New Mexico state tax code, general assistance funds must be counted as “modified gross income” on your state tax return. However, whether or not the state actually taxes your GA benefits is unclear.
The same is true in dozens of other states, too. While many states keep their welfare and cash assistance programs in accordance with federal regulations, some do not. In other words, where you live and how you receive your benefits can determine how much (if anything) you need to pay in taxes at the end of the tax year. Consequently, you’ll need to contact the tax authority or relevant benefits program in your state for more information.
The Bottom Line
The switch from traditional food stamps and welfare checks to the Electronic Benefits Transfer (EBT) system has helped save a lot of time and money. It has also ensured that those in need of assistance can receive and use their benefits as quickly as possible. As an added bonus, most types of EBT benefits are classified as non-taxable, which should give you greater peace of mind when it comes time to file your tax return.
So, is EBT taxable income? As previously stated, the answer is no — more often than not. However, since dozens of different state and federal programs distribute funds through the EBT system, you may be liable to pay taxes based on the type of funds you receive, as well as your location. Thus, if you need professional advice on the tax obligations specific to your state and benefits, be sure to seek out free legal aid today!