Earned Income Disregards: SNAP’s 20% Deduction and TANF Rules

Earned income disregards under SNAP and TANF are the slices of your wages each program ignores before deciding your monthly benefit. SNAP uses one federal rule for everyone: a flat 20 percent deduction from earnings, plus a standard deduction that comes off gross income.¹ TANF works differently. Each state writes its own disregard, so the amount ignored from your paycheck depends entirely on where you live.²

SNAP’s 20 Percent Earned Income Deduction

SNAP subtracts 20 percent of your earned income automatically. Earn $1,500 a month in wages and the program sets aside $300 before looking at any other deduction.¹ Congress built the 20 percent figure to cover payroll taxes, commuting, and other costs of holding a job, so there are no receipts to keep and no individual work expenses to itemize.³

A separate standard deduction comes off gross income for every SNAP household, earned income or not. For fiscal year 2026 (October 2025 through September 2026), that amount is $209 a month for households of one to three, with higher figures for larger households and for Alaska, Hawaii, Guam, and the U.S. Virgin Islands.¹ Nothing needs to be documented to receive it.

TANF Disregards Depend on Your State

TANF runs as a federal block grant. Federal law requires that families be “needy” but sets no formula for how states must measure that need.² Some states subtract a flat dollar amount from monthly earnings, some use a percentage, and some combine both. Flat disregards across the states range from $0 to roughly $450 a month, and $90 is the most common figure.

The $90 amount comes from Aid to Families with Dependent Children, TANF’s predecessor. AFDC required states to disregard $90 in monthly earnings for workers employed more than 12 months.⁴ When TANF replaced AFDC in 1996, that federal requirement went away, but many states kept the $90 they were already using. Your caseworker applies whichever disregard your state has adopted, so the dollar amount or percentage is a local answer, not a national one.

Dependent Care Comes Off on Top

Both programs let you deduct out-of-pocket dependent care needed so a household member can work, train, or study. SNAP allows the deduction with no federal dollar cap, provided the expense is tied to hours actually worked or spent in a qualifying program rather than general babysitting.¹ Expect to submit receipts or a provider statement, and expect a caseworker to check that the care hours line up with your pay stubs.

TANF handles dependent care state by state. Old AFDC regulations capped the deduction at $200 a month for children under age two and $175 for older children and incapacitated adults.⁵ Some states still use those numbers; others have raised or restructured them. Ask your caseworker for the current figure in your state before assuming the old caps apply.

Self-Employment Earnings Are Handled Differently

If you work for yourself, neither program simply lops 20 percent off your gross. Both start with gross self-employment revenue and subtract allowable business expenses to reach net self-employment income. Rent for business space, equipment, supplies, license fees, and interest on business loans are typically allowed. Depreciation, personal income taxes, and Social Security taxes are not, even if they appear on your tax return.

Some states offer a shortcut: a standard self-employment deduction, often 40 to 50 percent of gross revenue, so you avoid documenting each expense. If your real costs are higher, you can generally itemize instead with full documentation. Self-employment income is often annualized: a full year of revenue and expenses divided by twelve, rather than one month’s swings. Seasonal work or a new business is averaged over whatever period you have been operating.

Where Disregards Fit in Eligibility

Disregards only shape your benefit; they do not always get you in the door. For SNAP, most households must first pass a gross income test at or below 130 percent of the federal poverty level, applied to raw earnings before any deduction. The 20 percent earnings deduction cannot help you clear that hurdle. It shows up at the next step, the net income test at or below 100 percent of the poverty level, where the standard deduction, the 20 percent earnings deduction, dependent care, and shelter costs all come off.⁶ Households with an elderly or disabled member usually face only the net test.

TANF has no federally mandated gross income limit. Each state sets its own thresholds and decides whether to run a gross test, a net test, or both. A common pattern is a gross screen at 185 percent of the state’s standard of need, followed by a net test after the earned income disregard and care expenses come off.

Time-Limited Disregards and the Cliff

Some states front-load their TANF disregard so that new workers keep more of their earnings for the first few months on a job, then step down to the ongoing rate. The design traces back to the pre-1981 AFDC rule that let states disregard $30 plus one-third of the remainder. The Omnibus Budget Reconciliation Act of 1981 put time limits on that formula: the one-third portion lasted only four consecutive months of employment, the $30 flat piece continued for another eight months, and after twelve months the disregard dropped to $90.⁴ Under TANF, states can build any version of this they like, or none.

Whatever the design, the risk is the same. When the enhanced disregard ends, your countable income jumps and your benefit drops, sometimes by more than a hundred dollars in a single month. That is the cliff effect. If your state uses a time-limited disregard, ask your caseworker when it expires and what your benefit will be at the baseline rate, and set money aside during the higher-benefit months if you can.

Report Income Changes So the Disregard Is Applied Correctly

Disregards only work if the agency has current earnings information. SNAP generally requires you to report when household gross monthly income crosses 130 percent of the federal poverty level for your household size, usually by the 10th day of the month after the change. Missing that deadline can trigger an overpayment finding and repayment demand.

TANF reporting rules vary. States typically require notice of new employment or a significant earnings change within a set number of days, but the trigger and timeline depend on the state’s own rules. When in doubt, report the change. A recalculation done at the right time protects your disregard; one done after the fact often means giving benefits back.

1
Food and Nutrition Service. SNAP Eligibility
2
Congressional Research Service. The TANF Block Grant
3
Office of the Law Revision Counsel. 7 USC 2014 – Eligible Households
4
Congressional Research Service. Work Requirements: The TANF Work Standard and How States Met It
5
eCFR. 45 CFR 233.20
6
Food and Nutrition Service. SNAP FY2026 Income Eligibility Standards