Benefit Cliff Calculator

What Is a Benefit Cliff?

A benefit cliff happens when a small increase in earnings causes a large loss in public benefits.

For example:

• You earn $1 more per hour.
• That pushes your income over a program limit.
• You lose $600 per month in childcare support.

Now your paycheck is higher. But your total income after lost benefits is lower.

That’s the cliff.

It can feel like being punished for working more.

What Does a Benefit Cliff Calculator Do?

A Benefit Cliff Calculator compares:

1. Your current situation
2. Your proposed new job or wage
3. Your total resources before and after

It calculates:

• Current monthly wages
• Proposed monthly wages
• Total resources including benefits
• Benefits that may be lost
• Net financial change
• Effective marginal tax rate
• Breakeven wage needed
• Cliff severity warning
• Practical recommendation

Instead of guessing, you get clear numbers.

Key Inputs in the Calculator

The calculator you shared uses the following inputs:

1. Household Size

Benefit limits depend on how many people live in your home.

Programs use Federal Poverty Level (FPL) guidelines to set limits. A family of four has a different income threshold than a single adult.

2. Current Income

• Current monthly wages
• Current weekly hours

3. Proposed Job Details

• Proposed hourly wage
• Proposed weekly hours

The calculator multiplies hours × wage × 4.333 weeks per month to estimate monthly income.

4. Current Benefits

You enter the monthly value of:

• SNAP
• Childcare subsidy
• Housing voucher
• Medicaid (estimated monthly value)
• TANF
• EITC/CTC (if applicable)

This allows the tool to calculate total household resources.

5. State Benefit Rules

States vary in how they apply:

• Medicaid expansion (138% FPL in expansion states)
• Childcare income thresholds (75%–100% SMI in your model)
• SNAP gross income limits
• Standard utility allowances

Your calculator includes four rule types:

• Medicaid Expansion State
• Non-Expansion State
• Generous Benefits State
• Strict Benefits State

This changes how fast benefits phase out.

How the Calculator Identifies a Benefit Cliff

The tool performs these core steps:

Step 1: Calculate Current Total Resources

It adds:

• Current wages
• All current benefits
• Tax credits (if selected)

Step 2: Calculate Proposed Monthly Income

It calculates:

Proposed wage × proposed hours × 4.333

Then it compares income against program thresholds.

Step 3: Identify Benefits Lost

Benefits are reduced or eliminated if income crosses limits such as:

• SNAP gross income threshold
• Childcare subsidy FPL threshold
• Medicaid income limit
• TANF annual cap
• Housing FPL percentage

If the proposed income exceeds those limits, the calculator subtracts those benefits.

Step 4: Compare Total Resources

It calculates:

Net Change = Proposed Total – Current Total

This shows whether you gain or lose money overall.

Effective Marginal Tax Rate (EMTR)

One of the most important outputs is:

Effective Marginal Tax Rate

This measures how much of your additional earnings you lose due to reduced benefits.

Formula used:

(income gain – net gain) ÷ income gain × 100

Example:

• Income increase: $800
• Net gain after benefit loss: $200
• $600 lost due to benefit reduction

Effective marginal tax rate = 75%

If it exceeds 100%, you are losing more in benefits than you gain in wages.

That’s a serious cliff.

Types of Cliffs Identified

Your calculator flags different levels:

No Major Cliff

You gain more than you lose.

Gradual Phase-Out

Manageable benefit reduction.

Moderate Cliff

Significant loss. Proceed carefully.

Severe Cliff

Very high effective tax rate.

Critical Cliff

You lose money despite earning more.

This is when families feel trapped.

Breakeven Wage

The calculator also estimates:

Breakeven Wage Needed

This shows the hourly wage required to fully offset lost benefits.

If a raise causes a net loss, the calculator estimates how much higher the wage must be to break even.

This is powerful for negotiation and career planning.

Real-World Example

Let’s say:

• Single parent with 2 children
• Current wage: $14/hour
• 30 hours per week
• Receives $500 SNAP
• $900 childcare subsidy
• $400 Medicaid value

Now they get an offer:

• $16/hour
• 40 hours per week

Income rises. But childcare and SNAP phase out.

After calculation:

• Income gain: $1,100
• Benefits lost: $1,300
• Net change: –$200
• Effective marginal tax rate: 118%

That’s a critical cliff.

Without a calculator, that risk isn’t obvious.

Why Benefit Cliffs Matter

Benefit cliffs affect:

• Career decisions
• Overtime acceptance
• Promotions
• Job changes
• Family budgeting
• Childcare planning

Many families hesitate to accept raises because they fear losing healthcare or childcare.

The calculator turns fear into numbers.

Programs Most Commonly Involved in Cliffs

1. SNAP (food assistance)
2. Medicaid
3. Childcare subsidies (CCDF)
4. Housing vouchers
5. TANF
6. EITC and CTC

When multiple programs phase out at once, cliffs become steep.

Important Limitations

A Benefit Cliff Calculator is educational.

It does not replace:

• State eligibility determinations
• County caseworker assessments
• Official benefit letters

Real-world rules include:

• Asset limits
• Disability status
• Transitional benefits
• State waivers
• Work requirements

Always verify with your local human services agency.

Who Should Use a Benefit Cliff Calculator?

This tool is useful for:

• Working parents considering more hours
• People offered promotions
• Social workers
• Workforce development programs
• Policy researchers
• Financial coaches

It is especially valuable during job transitions.

How to Use It Wisely

1. Enter accurate benefit amounts.
2. Include healthcare value realistically.
3. Compare multiple wage scenarios.
4. Check if transitional Medicaid exists in your state.
5. Look at long-term career growth, not just month one.

Sometimes short-term loss leads to long-term stability.
Other times, waiting makes financial sense.

The calculator helps you see both.

Why This Tool Is So Important in 2025

Benefit eligibility is based on federal poverty guidelines and state implementation.

With rising wages and rising costs:

• Small pay increases can push families over thresholds.
• Childcare costs are high.
• Medicaid eligibility varies by state.
• SNAP limits remain strict.

As wages increase nationwide, more families encounter cliffs.

This makes planning tools essential.