The U.S. federal poverty level is a measure of income the U.S. government uses to determine who is eligible for subsidies, programs, and benefits.
The Department of Health and Human Services (HHS) updates the poverty guidelines each January to account for inflation.
2021 Federal Poverty Guidelines Chart
The HHS issues poverty guidelines for each household size. For example, the poverty level for a household of four in 2021 is an annual income of $26,500. To get the poverty level for larger families, add $4,540 for each additional person in the household. For smaller families, subtract $4,540 per person. Guidelines for Alaska and Hawaii are higher since it's more expensive to live there. The chart below calculates it for you:
|Number of People in Household||48 States & DC||Alaska||Hawaii|
|For nine or more, add this amount for each additional person||$4,540||$5,680||$5,220|
Agencies help families who earn more than the federal poverty level. For example, some programs offer subsidies to families that are 150% of the federal poverty level. For a household of four, that would be $39,750 (1.5 x $26,500).
Programs That Use the Poverty Guidelines
Many federal programs use the poverty guidelines to determine eligibility. The most notable are the Supplemental Nutrition Assistance Program (SNAP), Medicaid, and the Affordable Care Act (ACA), as detailed below:
- SNAP: Available to those with a gross monthly income of 130% of the federal poverty level and whose household has less than $3,500 in assets if an elderly or disabled person lives there or less than $2,250 in assets if no elderly or disabled person lives there.
- Medicaid and Children’s Health Insurance Program (CHIP): Provide health care coverage to low-income individuals. Covering 72.5 million Americans, they are the largest source of U.S. health coverage.
- ACA-expanded Medicaid: Available to adults in households whose income is 133% of the poverty level. The program does not take into account how much a family has in assets. In states that didn't accept expanded Medicare coverage, the income requirement depends on the state.
- ACA: Provides health insurance at subsidized rates for those making 400% or less of the poverty level.The savings on insurance premiums vary according to income and household size.
- Head Start and Early Head Start: Provide educational, health, and well-being programs for young children in families earning below the poverty guidelines. The National School Lunch Program provides free lunches to children in families with incomes at or below 130% of the federal poverty level. Those who earn below 185% are eligible for a discounted lunch.
- Temporary Assistance for Needy Families (TANF): Provides direct income assistance. The federal government funds it, but the states develop their own eligibility requirements. Most states use the federal poverty level when making the requirement.
How the Poverty Guidelines Measure Eligibility
The poverty level measures a family's annual cash income before taxes. It includes income from earnings, unemployment benefits, Social Security, rent, and dividends. It does not include non-cash capital gains or benefits such as public housing and food stamps.
The poverty guidelines only measure income. Other poverty indicators measure total wealth, annual consumption, or a subjective assessment of well-being. Those indicators point to one’s standard of living, which takes into account the amount of material goods and services available to the individual or family.
Poverty Level Guidelines vs. Poverty Level Threshold
People use the phrase "poverty level" to describe both the poverty guidelines and the federal poverty threshold. The U.S. Census Bureau provides statistics on the poverty threshold. It determines how many Americans live in poverty. HHS uses the poverty threshold to calculate the poverty guidelines and determine financial eligibility for federal assistance programs.
Pros and Cons
The poverty guidelines are useful because they draw a line in the sand, differentiating between those who are poor and those who aren't. It gives those who study the poor in America—and those trying to help them—a starting place to understand and relieve poverty.
Adjusts for cost of living differences between Alaska, Hawaii, and the rest of the country.
Slows down flight to urban areas.
Opens up opportunities for assistance from government programs.
Doesn't adjust for differences in the cost of living between urban and rural areas.
Only measures income, not wealth or non-income benefits like food stamps.
The guidelines also have some pluses and minuses. They are the same across the nation, except for Hawaii and Alaska. They do take into consideration the higher cost of living in those two states. Unfortunately, they don't take into consideration the poverty levels between the contiguous states.
The guidelines also ignore the big difference between urban areas and rural areas. As a result, benefits buy more in rural areas, but the opportunities to find a good job and escape poverty are generally more readily available in urban areas.
Poverty guidelines don't capture other contributions to well-being, either. A family may have lots of assets, such as housing and capital gains and still live below the poverty level. Similarly, families that receive food stamps, housing assistance, and tax credits are also below the poverty level.
The federal poverty level originated with President Lyndon B. Johnson's War on Poverty initiative. It was one of the tools developed to measure and eradicate poverty. In his Inaugural address, Johnson called for "the richest nation on earth" to win the war. He wanted to assist "American families with incomes too small to even meet their basic needs." This War on Poverty created some of today's welfare programs.