Government benefits, from food assistance to childcare subsidies, depend on your household earning less than a certain amount. Make even a dollar more, and you can kiss those benefits goodbye.
So, what do you do when that little raise or bonus makes you ineligible but doesn’t help enough to pay for your essentials?
Making just a little more than the income limit for assistance is known as the benefit cliff. It’s the point when the government says, “You’re on your own,” but your wallet is saying, “Good luck with that.”
Rather than jumping off this cliff into unknown financial waters, you can build a bridge that helps you transition from surviving off benefits to thriving on earnings.
Mapping Your Personal Benefit Cliff
Start your plan by inventorying your situation. Make a list of every program you utilize and write the gross income limit for each (based on your state and how many people live in your household.
Here is an example of a family of three living in Tennessee:
- Supplemental Nutrition Assistance Program (SNAP) – $34,656
- Women, Infants, and Children (WIC) – $49,303
- Child Nutrition Programs (school lunches) – $34,656 for free or $49,303 for reduced
- Medicaid – $26,650 for adults, $56,232 for children, and $66,636 for pregnant women
- Temporary Assistance for Needy Families (TANF) – $11,328
- Social Security Income – $11,928
- Section 8 Housing Choice Vouchers – $34,750
- Public Housing – $55,650
- Low-Income Home Energy Assistance Program (LIHEAP) – $41,316
- Earned Income Tax Credit (EITC) – $57,554
- Head Start (early education) – $26,650
- Lifeline (phone/internet) – $35,988
Then, use the following formula to determine if a raise (new job, etc.) would actually help your household, mean losing more than what you need, or end up breaking even.
(New Take-Home Pay) – (Lost Benefit Value) = True Value
So, let’s use the same Tennessee family of three with a gross income of $49,000 (and therefore eligible for WIC, reduced school lunches, Medicaid for children, and public housing).
A $3.50 hourly raise would increase their income by $7,280 annually (to $56,282) and push them out of eligibility for all of their current benefits, which would be approximately valued at:
- WIC – $600 to $1,500
- Reduced school lunches – $850
- Medicaid for children – $3,500 to $10,000
- Public housing – $11,000
The total loss of benefits is more than the increase of pay. For this family to break even, they would need to earn at least $15,950 more (or $64,950).
Strategies to Soften the Loss of Benefits
You might be tempted to refuse a raise or a promotion if it would outweigh your current benefits. But there are legal, strategic ways to manage your income while your career grows.
1. Lower Your Countable Income with Retirement Accounts
When you contribute to a traditional retirement account at work, that money is taken out of your paycheck before taxes. For many programs, eligibility is based on your adjusted or net income. Your countable income stays the same, you keep your benefits, and you’ve set aside money for your future.
2. The HSA Triple Threat
If your new job offers a High Deductible Health Plan (HDHP), you likely have access to a Health Savings Account (HSA). Like a 401(k), HSA contributions reduce your taxable income. By putting your raise into an HSA, you reduce your income while building a tax-free fund for doctor visits and prescriptions.
3. Negotiate for Non-Cash Benefits
Consider asking for benefits instead of a raise, such as:
- Childcare Subsidies: Ask if the company can pay a portion of your daycare bill directly.
- Transit or Gas Cards: These often don’t show up as gross income.
- Professional Development: Asking employers to pay for a certification or tuition increases your future earning power without changing your current income.
4. Understand the Expense Deductions
Many programs allow you to subtract certain expenses from your gross income. Make sure you’re claiming:
- Excess Shelter Costs: If your rent and utilities exceed half of your income, you may qualify for a significant deduction.
- Dependent Care: If you pay for childcare so you can work, that cost should be deducted from your countable income.
5. Transition to the Marketplace
The Affordable Care Act Marketplace is designed for those on the other side of the benefit cliff. Families just over the Medicaid limit often qualify for Silver plans with premiums as low as $10 to $50 a month because the government pays the rest.
Advocacy and Community Support
Even when you do everything right, you may still find yourself crossing a benefit threshold. When that happens, your first line of defense is transitional assistance, and your second is the community.
Talk to Your Caseworker
Don’t wait for a “Termination of Benefits” letter to arrive in the mail. Schedule a call or visit the assistance office to ask for transitional assistance. Your family may still be eligible for programs, like child care subsidies and Medicaid, for 6 to 18 months after your income increases.
Likewise, ask your caseworker if an earned income disregard applies to you. For some programs, the state will ignore a portion of your new earnings for the first few months to help you stabilize.
Pursue Local Resources with No-Income-Check Policies
Unlike federal programs, many local non-profits have low-barrier or no-income-check policies.
- Mobile Food Pantries – Many organizations (like those in the Feeding America network) operate mobile pantries that do not require proof of income or DHS paperwork.
- Diaper and Hygiene Banks – Diapers and cleaning supplies are rarely covered by SNAP or WIC. Local diaper banks often provide these essentials to any working parent, regardless of their exact hourly wage.
- St. Vincent de Paul & Salvation Army – These organizations often provide one-time emergency assistance for a high utility bill or a car repair that could threaten your ability to get to your new, higher-paying job.
- 2-1-1 Referral Services – Dial 2-1-1 from any phone to reach a local operator. Tell them, “I’ve just started a new job, and I’m over the limit for SNAP; I need a food resource that doesn’t require a government referral.”