Since the HOME Final Rule went into effect October 16, 1996, the HOME Program has given PJs and their partners the flexibility to choose among the following three definitions of "annual income" when calculating income and allowances for HOME-assisted activities.
- Annual income as defined in 24 CFR 5.609, referred to as "Part 5 annual income";
- Annual income as reported under the Census Long Form for the most recent decennial census; and
- "Adjusted gross income" as defined for reporting purposes under the IRS Form 1040 long form (not IRS Forms 1040A or 1040EZ).
Click here to learn about the major differences between the three definitions of "annual income."
This change in the HOME regulations is consistent with a similar change to the CDBG regulations which went into effect December 11, 1995. The change in the HOME regulations was intended to ease administration for PJs when projects are funded by multiple sources, including CDBG.
PJs may use more than one definition of annual income within their HOME Program in its entirety. However, PJs must also ensure that applicants to their HOME-funded programs and activities are treated equitably. For this reason, the same definition of income must be used for all applicants within a particular program or activity.
For example, if a PJ decides to use the Part 5 definition of annual income for its homebuyer program, it must use this definition for all applicants to the homebuyer program. It may not use the Census Long Form definition for one applicant and the Part 5 definition for another applicant. However, the PJ may choose to use the Census Long Form definition for all applicants to its owner-occupied rehabilitation programs.
Defining Annual Income
The term "annual income" is used in the HOME Program to refer to annual (gross) income, as calculated using one of the three definitions allowed under the HOME Program.
While the IRS uses the term "adjusted gross income", this amount is considered "annual income" for the purposes of the HOME Program.
Under the HOME Program, the term "adjusted income" is used only in reference to the process of subtracting certain deductions from annual (gross) income to determine subsidy or payment levels in accordance with 24 CFR 5.611.
See the Calculating Adjusted Income topic of this module for guidance on "adjusted income" under the HOME Program.