Federal Poverty Level (FPL) Definition

What Is the Federal Poverty Level (FPL)?

The federal poverty level (FPL) is an economic measure used to decide whether the income level of an individual or family qualifies them for certain federal benefits and programs. The Department of Health and Human Services (HHS) updates its poverty guidelines, illustrating the set minimum amount of income that a family needs for food, clothing, transportation, shelter, and other necessities, once a year, adjusted for inflation.

The FPL, which is referred to as the poverty line for short, shouldn’t be confused with the poverty threshold. This threshold is another important federal measure that actually defines poverty. The poverty threshold is mainly used for statistical purposes and to help calculate poverty guidelines.

Understanding the Federal Poverty Level (FPL)

The U.S. Census Bureau issues a public report on the level of poverty in the country every year. The report provides an estimate of:

• The number of people living in poverty
• The percentage of people living below the poverty level
• The poverty distribution by age, sex, ethnicity, location, etc.
• The level of income inequality in the country.

The FPL is typically issued annually in January by HHS and is determined by household income and size. Within its annual report, the HHS shows the total cost needed by the average person per year to cover basic necessities such as food, utilities, and accommodation. This number is adjusted each year for inflation.

The FPL is used to establish who qualifies for certain federal subsidies and aid, such as Medicaid, Family and Planning Services, Children’s Health Insurance Program (CHIP), the National School Lunch Program, and Supplemental Nutrition Assistance Program (SNAP), which is commonly known as food stamps

What Is FPL Income in 2023?

The official federal poverty level varies according to the size of the family and their geographical location within the country. For instance, Alaska and Hawaii have higher poverty levels since the cost of living in these regions is higher.

A higher threshold is added to the poverty level for each additional family member, set as follows:

• Contiguous United States: $5,140 per family member for 2023
• Alaska: $6,430 for 2023
• Hawaii: $5,910 for 2023
  

Thus, since the FPL for a family of two is $19,720 in 2023, a family of three would have a poverty level set at $19,720 + $5,140 = $24,860 in any state other than Hawaii or Alaska.

The table below shows the federal poverty guidelines for household sizes by region for 2023:

Federal Poverty Level vs. Poverty Threshold

As noted above, don't confuse the FPL with the poverty threshold because they two are inherently different. The poverty threshold is another important federal poverty measure that actually defines what poverty is and provides statistics on the number of Americans living in such conditions.

Data on the poverty threshold is created by the Census Bureau, which uses pre-tax income as a yardstick to measure poverty. The statistical report on the poverty threshold is then used by the HHS to determine the FPL.

FPL Requirements for Welfare Programs

How a family’s income compares to the FPL determines if they are eligible for any plans. When determining an individual's or a family's eligibility for receiving benefits, some government agencies compare before-tax income to the poverty guidelines, while others compare after-tax income.

Certain federal agencies and programs use percentage multiples of the FPL to define income limits and to set eligibility criteria for households. For example, an income of less than 138% of the FPL will qualify an individual for Medicaid or CHIP. This means that an individual in a one-household set up in, say, Texas will need to earn below 138% x $14,580 = $20,120.40 in 2023 to be eligible for Medicaid.

Eligibility for other programs may vary. For instance, the Utility Assistance program requires a household to earn an income of less than 150% of the FPL. Meanwhile, to be eligible for premium tax credits on health insurance marketplace plans, which would help reduce the monthly payments for a health plan, the criteria range from 100% to 400% of FPL.

To calculate the percentage of the poverty level, divide income by the poverty guideline and multiply by 100. So, a family of five in New Jersey with an annual income of $80,000 would be calculated to earn ($80,000 ÷ $32,470) x 100 = 246% of the federal poverty guidelines for 2023 and will likely not qualify for Utility Assistance or Medicaid but may still be eligible for an advanced premium tax credit subsidy.

The Bottom Line

The federal poverty level is an economic measure used to determine household eligibility for a variety of welfare programs. The measure is set annually by the Departhment of Health and Human Services to account for inflation. Additionally, the level is slightly higher in Alaska and Hawaii compared to other states to account for cost of living differences. The FPL is a distinct measure from the poverty threshold, and the two should not be conflated.