Table of Contents

Means Test: Definition, How It Works, and Examples

By

澳洲幸运5官方开奖结果体彩网:Adam Hayes

Updated April 10, 2025

Reviewed by

Ebony Howard

Fact checked by

Suzanne Kvilhaug

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Definition

A means test is a formula that uses someone's income to determine their eligibility for assistance or benefits.

What Is a Means Test?

A means test is a method for determining whether someone qualifies for financial assistance to obtain a service or good. It looks at the means, or monetary resources, a person has available to them to pay for a particular service or good, then determines that person's eligibility for financial assistance based on their ability to pay for it.

Key Takeaways

A means test determines if a person or household is eligible to receive some sort of benefit or payment.
Means-tested benefits include many government assistance and state and federal welfare programs that measure a family's income against the federal poverty line.
Universal or unconditional benefits, such as public schools, Medicare, and Social Security retirement income do not feature a means test.

Understanding Means Tests

Today in the United States, welfare benefits are given based on a means test of income dealing with the Federal Poverty Level (FPL), or the poverty line. This number is an economic measure that is used to decide whether the income level of an individual or family qualifies for certain federal benefits and welfare programs. The FPL is the set minimum amount of income that a family needs for food, clothing, transportation, shelter, and other necessities.

The FPL is used to determine who would qualify for certain 澳洲幸运5官方开奖结果体彩网:federal subsidies and aid such as Medicaid, 澳洲幸运5官方开奖结果体彩网:food stamps, Family Planning Services, the 澳洲幸运5官方开奖结果体彩网:Chi💖ldren’s Health Insurance Program (CHIP), and the National School Lunch Program. The FPL varies according to 𒈔the size of the family and their locatജion.

For example, Alaska and Hawaii have higher poverty levels since the 澳洲幸运5官方开奖结果体彩网:cost of living in these regions is higher. In terms of family size, as of 2025, $5,550 ☂is added to the poverty level for each additional family member ($6,880 for Alaska and $6,꧒330 for Hawaii).

If the FPL for a family of two is $21,150, a family of three would therefore have a poverty level set at $26,650 ($21,150 + $5,500) in any of the states excluding Hawaii and Alaska. A family of two in Hawaii has a poverty level set at $24,320. For a family of three in Hawaii, it's $30,650. A family of two in Alaska has a poverty level set at $26,430. For a family of three in Alaska, it's $33,310.

Means Test Examples

A common means test is the one used to determine eligibility for 澳洲幸运5官方开奖结果体彩网:Chapter 7 bankruptcy. Since debts do not have to be repaid under Chapter 7 bankruptcy, it is supposed to be limited to bankruptcy filers experiencing the greatest hardship.

Fast Fact

People who do not pass the Chapter 7 means test are limited to Chapter 13 bankruptcy, which establishes a repayment plan for debts.

Financial aid for postsecondary education is also means tested, with students from lower-income backgrounds typically receiving more aid. For need-based financial aid, eligibility is determined by 🏅the🍒 family's income.

What Is the Opposite of a Means Test?

The opposite type of benefits from a means test is one that accrues universally or unconditionally. 澳洲幸运5官方开奖结果体彩网:Universal basic income (UBI) is one example where everybody is paid some subsistence level of income regardless of other income or assets. 澳洲幸运5官方开奖结果体彩网:Social Security income for older Americans is also universal, although the level of benefits differ based on lifetime earnings. Publi♎c education is also often given unconditionally.

Does Medicare Use a Means Test?

Yes, means testing is used for certain parts of Medicare: Part B and Part D.

Is Financial Aid for College Means Tested?

Some types of postsecondary financial aid are means tested. Educational institutions or scholarship foundations may offer means-based scholarships or grants, which are given to students who are qualified to attend an educational institution but wouldn't otherwise be able to afford tuition. Federal financial aid for higher education is also subject to means testing, as households who have accumulated enough assets to fund a college education or who make enough money to have funded an education if they had saved often don't qualify for 澳洲幸运5官方开奖结果体彩网:financial aid.

The Bottom Line

Means tests are commonly used to determine eligibility for various types of assistance or relief. With means testing, if you have the means (ability) to pay for something on your own, you won't be given free assistance to pay for it. Means-tested benefits can be contrasted with universal, or unconditional, benefits, which are given to everybody regardless of economic position or income.

Article Sources

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