Are you living in poverty? Sometimes that can be a difficult question to answer. Many people struggle to pay bills. However, not all of them are considered poor. Where's the line between living in poverty and just having a low income? The federal government defines poverty in two ways: poverty thresholds and poverty guidelines.

What Are Poverty Thresholds?

The US Census Bureau uses specific money income thresholds to determine who lives in poverty. These income thresholds are called poverty thresholds. They represent the minimum amount of money needed to support families of various sizes.

Poverty thresholds are used to estimate the official poverty statistics in this country. One example is estimating the number of Americans in poverty each year. An individual or family is considered poor if its income is below the poverty threshold.

The Census Bureau assigns each person or family 1 out of 48 possible poverty thresholds. The poverty thresholds vary based on family size and the ages of the members. There's no geographic variation. All 50 states and Washington, DC have the same poverty thresholds.

A family is in poverty if its total family income is less than the threshold for that family. Every member of the family has the same poverty status. A family isn't living in poverty if its total income equals or is greater than the threshold.

The Census Bureau updates the thresholds on a yearly basis. It must do this to keep up with inflation. The Consumer Price Index for All Urban Consumers is used by the Census Bureau to determine the actual amount of change needed to the thresholds.

What Are Poverty Guidelines?

Poverty guidelines are a simplified version of the poverty thresholds. They are used for administrative purposes and not for official statistics. This means that the poverty guidelines determine the financial eligibility of people for certain government programs, not the poverty thresholds.

Poverty guideline amounts vary by family size. There's one set of amounts for the 48 contiguous states and Washington, DC. Alaska and Hawaii each have their own set of figures.

To determine the guideline amounts, the government uses the poverty thresholds as a starting point. It then rounds the figures to various multiples of $10. All amounts must end only in zero. The government also equalizes the differences between adjacent family-size figures.

The guidelines are issued each year by the Department of Health and Human Services. They're published in the Federal Register. Some government programs use the new guidelines on the date of publication. Other programs make them effective at a later date.

Use of Poverty Guidelines by the Government

Many government programs are available only to the poor. The government uses the poverty guidelines to determine eligible people. Some examples of programs that use the guidelines include:

  • Parts of Medicaid
  • Medicare – prescription drug coverage (subsidized portion only)
  • Head Start
  • Low-Income Home Energy Assistance Program (LIHEAP)
  • Supplemental Nutrition Assistance Program (SNAP)
  • Special Supplemental Nutrition Program for Women, Infants, and Children (WIC)
  • National School Lunch Program
  • Job Corps
  • Legal Services for the Poor

Some states and local governments use the poverty guidelines for a few of their programs. Examples include child support enforcement financial guidelines and determining legal indigence. Some private companies also use the guidelines for services to the poor.

Revised Poverty Formula

Many people believe that there are more poor people in this country than the poverty statistics show. This is especially true with older Americans. The increase in medical care has made it impossible for many elderly people to pay for the basic necessities of life.

The federal government has adopted a new poverty formula in an attempt to reflect reality. The formula is from the National Academy of Science. It takes into account a variety of factors in determining the poverty rate. Some examples include:

  • Medical costs
  • Transportation costs
  • Updated costs of living
  • Food stamps and tax credits

Based on this new formula, the poverty rate increases a great deal. However, it doesn't replace the traditional poverty thresholds. The new poverty rate only supplements the traditional one. It doesn't change who's eligible to receive government benefits.

Questions for Your Attorney

  • Am I considered "living in poverty" under the current poverty guidelines if I make under $25,000 a year and have 3 children?
  • Will winnings from gambling be added to my income to determine whether I am eligible for government programs?
  • Is there a limit to how many government programs I can sign up for based on my low income level?

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