VA Health Benefits Income & Asset Limitations

[Burke]

In the course of TY 2012, my client's broker traded stocks in the TP's account. These proceeds were reported to the IRS for tax purposes, of course, and were correctly reported on the tax return with the proper basis, resulting in a loss. Now the VA is counting all the gross proceeds as gross income making him ineligible for certain health benefits. (The gross proceeds reported may have exceeded the FMV of the entire account if the same funds were traded more than once during the year.) TP claimed a net loss of $3K on the return and had a C/O loss of some $16K from previous years. Is this going to invalidate his eligibility every year trades occur? If nothing is traded, his gross income meets the requirements ( even disregarding the $3K stock loss.)

[zeros]

Household Income

Don't know too much about this but they might be figuring "household income" rather than adjust gross income. Doesn't sound correct to just count the gross sale without considering the cost basis.

[mastertaxguy]

Va health benefits means testing

In the course of TY 2012, my client's broker traded stocks in the TP's account. These proceeds were reported to the IRS for tax purposes, of course, and were correctly reported on the tax return with the proper basis, resulting in a loss. Now the VA is counting all the gross proceeds as gross income making him ineligible for certain health benefits. (The gross proceeds reported may have exceeded the FMV of the entire account if the same funds were traded more than once during the year.) TP claimed a net loss of $3K on the return and had a C/O loss of some $16K from previous years. Is this going to invalidate his eligibility every year trades occur? If nothing is traded, his gross income meets the requirements ( even disregarding the $3K stock loss.)

This may provide some guidance for you (from the V.A. website):


Most Veterans who do not receive a VA service-connected disability or pension payment or have a special eligibility such as a Purple Heart, must complete a financial assessment at the time of enrollment. When applying for enrollment, these Veterans must provide their total gross household income (includes spouse and dependents, if any) and net worth information for the previous calendar year. This income information will be used to determine the Veteran’s enrollment status and copay responsibility for VA health care and/or prescription medication.

As of March 24, 2014, most Veterans are no longer required to complete the annual financial assessment known as a Means Test. Instead, VA will receive income information from the Internal Revenue Service (IRS) and Social Security Administration (SSA), and will contact the Veterans only if the information received indicates a change in their VA health benefits may be appropriate. The elimination of the annual means test frees enrolled Veterans to enjoy their VA health care benefits without worrying about completing annual income assessment forms. Under the new process, Veterans will be required to have one financial assessment on file – their current file if they’re already enrolled, or the assessment they provide when they apply. That assessment will be maintained and monitored by VA and updated only as substantial income changes occur. [more follows-see the website]


The issue you raise may involve both assets and gross income, not net income from capital gains. With the VA obtaining information from IRS (simliar to what is supposed to be happening with private health insurers under the ACA), we can expect more situations like this in the future.

[ChEAr$]

VA's position is totally wrong and unjust. Client should vigorously appeal and educate the minions at VA what constitutes income and wealth.

[Burke]

The TP used to have to fill out a financial assessment form yearly, listing his annual income and wealth status. Now apparently the annual verification of income is no longer required, as the VA accesses income reported to the IRS and SSA and uses that. They do not have access to anyone's tax returns. One of their recent letters asks for the TP to submit a signed copy to them for review. So perhaps this will make a difference. If you access the Quick Reference Guide IB 10-454 dated Aug 2013 from their website, it simply says "Payments from Stocks and Bonds, Capital Gains." It lists Interest & Dividends in another place. Since they also count many other items which are NOT taxable income, i.e, death benefits from life insurance, gifts and inheritances, and non-taxable payments from pensions and Social Security, it is a little confusing. Will let you know what I find out. If they are going to use gross proceeds and there are losses, we are going to have to go through this every year.

[TaxGuyBill]

Is stock considered "personal property"? I know it's not "tangible personal property" but if it's "intangible" personal property, then Title 38, §3.272(e) excludes the income:


§ 3.272 Exclusions from income.

(e) Profit from sale of property. Profit realized from the disposition of real or personal property other than in the course of business, except amounts received in excess of the sales price, for example, interest on deferred sales is included as income. In installment sales, any payments received until the sales price is recovered are not included as income, but any amounts received which exceed the sales price are included, regardless of whether they represent principal or interest.

http://www.law.cornell.edu/cfr/text/38/3.272#e

If it's not "personal property", they do include some non-taxable income, such as inheritances.

http://www.law.cornell.edu/cfr/text/38/3.271#a_3

[Burke]

Thank you for that cite. Since the VA does not have access to the tax return information from the IRS (only what is reported to them as income from 3rd parties), this will result in the TP furnishing said tax return every year this comes up. It is interesting that in the case of an installment sale, income is not counted until the amount received exceeds the sale price. And how they are going to determine other income not reported to the IRS/SSA, like an inheritances, or death benefits from life insurance, etc is beyond me.