The Part 5 definition of annual income is the gross amount of income of all adult household members that is anticipated to be received during the coming 12-month period. This definition sounds straightforward, but there are several specific issues related to the calculation of Part 5 annual income.
The words highlighted above are key parts of the following phrases, which are essential to understanding the requirements for calculating Part 5 annual income.
- Gross amount. For the types of income
counted in the Part 5 definition, gross
amounts (before any deductions have been taken)
- Income of all adult household members. The Part 5 definition contains income "inclusions" (types of income to be counted) and "exclusions" (types of income that are not considered) for all adult members of a household.
- Anticipated to be received.Part 5 annual income is used to determine eligibility and the amount of Federal assistance a family can receive. A PJ must, therefore, use a household's expected ability to pay, not their past earnings, when estimating housing assistance needs.
Background on Using Part 5
The HOME Program previously required PJs to use only the Section 8 Program definition of annual income to determine the eligibility of applicants to their HOME programs.
The rules concerning Section 8 annual income were previously found at 24 CFR Part 813. However, Part 813 was removed from the Federal regulations on October 18, 1996. At the same time, 24 CFR Part 5 was published. Subpart F of Part 5 consolidated the requirements pertaining to income for many of HUD's programs, including Section 8.
Currently, the definition of annual income found at 24 CFR Part 5 is used by a variety of Federal programs, including:
- the HOME Investment Partnership Program,
- the Community Development Block Grant Program,
- the Section 8 Program,
- public housing programs, and
- the Low Income Housing Tax Credit Program.
Within each of these programs, the Part 5 definition of annual income can be used to determine program eligibility and, in some programs, the level of assistance the household will receive.
In some cases, two or more Federal programs may provide assistance to a single program or project at the local level. When this is the case, the PJ should be careful to choose a definition for income determinations that is permitted in all of the relevant Federal programs.
HUD Notice PIH-2004-11
HUD issued Notice PIH-2004-11, "Income Calculation Regarding Medicare Prescription Drug Cards and Transitional Assistance," on July 15, 2004. While the Notice addresses the calculation of annual household income under certain HUD programs, including certain Section 8 activities, the Notice and the Medicare Prescription Drug Card program do not affectthe calculation of annual income under the Part 5 definition, and thus does not affect the calculation of annual or adjusted income for the purposes of HOME eligibility. The Medicare Modernization Act authorizing this benefit amended the Social Security Act to require that benefits provided under this program "not be treated as benefits or otherwise taken into account in determining an individual's eligibility for, or amount of benefits under, any other Federal program." Benefits provided under the Medicare Prescription Drug Benefit program must be excluded from the calculation of annual income of tenants residing in HUD's public housing and assisted housing program units.
Whose Income to Count
Under the Part 5 definition of annual income, income from certain groups of people requires special consideration when calculating a household's annual income. Click on the key words below for more information on how to count the income of the following categories of people:
Types of Income to Count
At its most basic level, the Part 5 definition of annual income is made up of the types of household income that are:
- included in the definition ("inclusions"), and
- excluded from the definition ("exclusions").
A list of the Part 5 income "inclusions" and "exclusions" is published in the Code of Federal Regulations at 24 CFR 5.609. This list is periodically updated by HUD when changes are made to the Part 5 definition of annual income by the United States Congress.
Administrators of HOME and other Federal programs are generally expected to implement any changes to the regulations within 60 days of publication in the Federal Register.
Located below are easy-to-read tables showing the Part 5 income inclusions and exclusions published at 24 CFR 5.609 on April 1, 1998.
Search the Federal Register for changes to the Part 5 definition of annual income. (For best results, indicate that all Federal Register editions should be searched by the web site and type "24 CFR part 5", including the quotation marks, into the Search Terms field on this web page.)
Welfare assistance is generally counted in the Part 5 definition of annual income. Most PJs will therefore use the actual gross amount of welfare assistance the household receives in the calculation of "annual income". However, in certain "as-paid" localities a special calculation is required.
Part 5 Inclusions
This table presents the Part 5 income inclusions as stated in the Code of Federal Regulations.
||Statement from 24 CFR 5.609 paragraph (b) (April 1, 2004)|
|1. Income from wages, salaries, tips, etc.
||The full amount, before any payroll deductions, of wages and salaries, overtime pay, commissions, fees, tips and bonuses, and other compensation for personal services.|
|2. Business Income
||The net income from the operation of a business or profession. Expenditures for business expansion or amortization of capitalindebtedness shall not be used as deductions in determining net income. An allowance for depreciation of assets used in a business or profession may be deducted, based on straight-line depreciation, as provided in Internal Revenue Service regulations. Any withdrawal of cash or assets from the operation of a business or profession will be included in income, except to the extent the withdrawal is reimbursement of cash or assets invested in the operation by the family.|
|3. Interest & Dividend Income
||Interest, dividends, and other net income of any kind from real or personal property. Expenditures for amortization of capital indebtedness shall not be used as deductions in determining net income. An allowance for depreciation is permitted only as authorized in number 2 (above). Any withdrawal of cash or assets from an investment will be included in income, except to the extent the withdrawal is reimbursement of cash or assets invested by the family. Where the family has net family assets in excess of $5,000, annual income shall include the greater of the actual income derived from all net family assets or a percentage of the value of such assets based on the current passbook savings rate, as determined by HUD.|
4. Retirement & Insurance Income
|The full amount of periodic amounts received from Social Security, annuities, insurance policies, retirement funds, pensions, disability or death benefits, and other similar types of periodic receipts, including a lump-sum amount or prospective monthly amounts for the delayed start of a periodic amount (except as provided in number 14 of Income Exclusions).|
|5. Unemployment & Disability Income
||Payments in lieu of earnings, such as unemployment and disability compensation, worker's compensation, and severance pay (except as provided in number 3 of Income Exclusions).|
|6. Welfare Assistance
||Welfare Assistance. Welfare assistance payments made under the Temporary Assistance for Needy Families (TANF) program are included in annual income:
If the welfare assistance payment includes an amount specifically designated for shelter and utilities that is subject to adjustment by the welfare assistance agency in accordance with the actual cost of shelter and utilities, the amount of welfare assistance income to be included as income shall consist of:
- Qualify as assistance under the TANF program definition at 45 CFR 260.31; and
- Are otherwise excluded from the calculation of annual income per 24 CFR 5.609(c).
- the amount of the allowance or grant exclusive of the amount specifically designated for shelter or utilities; plus
- the maximum amount that the welfare assistance agency could in fact allow the family for shelter and utilities. If the family's welfare assistance is reduced from the standard of need by applying a percentage, the amount calculated under 24 CFR 5.609 shall be the amount resulting from one application of the percentage.
|7. Alimony, Child Support, & Gift Income
||Periodic and determinable allowances, such as alimony and child support payments, and regular contributions or gifts received from organizations or from persons not residing in the dwelling.|
|8. Armed Forces Income
||All regular pay, special day and allowances of a member of the Armed Forces (except as provided in number 7 of Income Exclusions).|
Part 5 exclusions
This table presents the Part 5 income exclusions as stated in the Code of Federal Regulations.
||Statement from 24 CFR 5.609 paragraph (c) (April 1, 2004) |
|1. Income of Children
||Income from employment of children (including foster children) under the age of 18 years.|
|2. Foster Care Payments
||Payments received for the care of foster children or foster adults (usually persons with disabilities, unrelated to the tenant family, who are unable to live alone).|
|3. Inheritance and Insurance Income
||Lump-sum additions to family assets, such as inheritances, insurance payments (including payments under health and accident insurance and worker's compensation), capital gains and settlement for personal or property losses (except as provided in number 5 of Income Inclusions).|
|4. Medical Expense Reimbursements
||Amounts received by the family that are specifically for, or in reimbursement of, the cost of medical expenses for any family member.|
|5. Income of Live-in Aides
||Income of a live-in aide (as defined in 24 CFR 5.403).|
|6. Disabled Persons
||Certain increases in income of a disabled member of qualified families residing in HOME-assisted housing or receiving HOME tenant-basedrental assistance (24 CFR 5.671(a)).|
|7. Student Financial Aid
||The full amount of student financial assistance paid directly to the student or to the educational institution.|
|8. Armed Forces Hostile Fire Pay
||The special pay to a family member serving in the Armed Forces who is exposed to hostile fire.|
|9. Self-Sufficiency Program Income
- Amounts received under training programs funded by HUD.
- Amounts received by a person with a disability that are disregarded for a limited time for purposes of Supplemental Security Income eligibility and benefits because they are set side for use under a Plan to Attain Self-Sufficiency (PASS).
- Amounts received by a participant in other publicly assisted programs that are specifically for, or in reimbursement of, out-of-pocket expenses incurred (special equipment, clothing, transportation, childcare, etc.) and which are made solely to allow participation in a specific program.
- Amounts received under a resident service stipend. A resident service stipend is a modest amount (not to exceed $200 per month) received by a resident for performing a service for the PHA or owner, on a part-time basis, that enhances the quality of life in the development. Such services may include, but are not limited to, fire patrol, hall monitoring, lawn maintenance, resident initiatives coordination, and serving as a member of the PHA's governing board. No resident may receive more than one such stipend during the same period of time.
- Incremental earnings and benefits resulting to any family member from participation in qualifying state or local employment training programs (including training not affiliated with a local government) and training of a family member as resident management staff. Amounts excluded by this provision must be received under employment training programs with clearly defined goals and objectives, and are excluded only for the period during which the family member participates in the employment training program.
||Temporary, nonrecurring, or sporadic income (including gifts).|
||Reparation payments paid by a foreign government pursuant to claims filed under the laws of that government by persons who were persecuted during the Nazi era.|
|12. Income from Full-time Students
||Earnings in excess of $480 for each full-time student 18 years old or older (excluding the head of household or spouse).|
|13. Adoption Assistance Payments
||Adoption assistance payments in excess of $480 per adopted child.|
|14. Social Security & SSI Income
||Deferred periodic amounts from SSI and Social Security benefits that are received in a lump sum amount or in prospective monthly amounts.|
|15. Property Tax Refunds
||Amounts received by the family in the form of refunds or rebates under state or local law for property taxes paid on the dwelling unit.|
|16. Home Care Assistance
||Amounts paid by a state agency to a family with a member who has a developmental disability and is living at home to offset the cost of services and equipment needed to keep this developmentally disabled family member at home.|
|17. Other Federal Exclusions
||Amounts specifically excluded by any other federal statute from consideration as income for purposes of determining eligibility or benefits under a category of assistance programs that includes assistance under any program to which the exclusions of 24 CFR 5.609(c) apply, including:
- The value of the allotment made under the Food Stamp Act of 1977;
- Payments received under the Domestic Volunteer Service Act of 1973 (employment through VISTA, Retired Senior Volunteer Program, Foster Grandparents Program, youthful offender incarceration alternatives, senior companions);
- Payments received under the Alaskan Native Claims Settlement Act;
- Income derived from the disposition of funds to the Grand River Band of Ottawa Indians;
- Income derived from certain submarginal land of the United States that is held in trust for certain Indian tribes;
- Payments or allowances made under the Department of Health and Human Services' Low-Income Home Energy Assistance Program;
- Payments received under the Maine Indian Claims Settlement Act of 1980 ( 25 U.S.C. 1721);
- The first $2,000 of per capita shares received from judgment funds awarded by the Indian Claims Commission or the U.S. Claims Court and the interests of individual Indians in trust or restricted lands, including the first $2,000 per year of income received by individual Indians from funds derived from interests held in such trust or restricted lands;
- Amounts of scholarships funded under Title IV of the Higher Education Act of 1965, including awards under the Federal workstudy program or under the Bureau of Indian Affairs student assistance programs;
- Payments received from programs funded under Title V of the Older Americans Act of 1985 (Green Thumb, Senior Aides, OlderAmerican Community Service Employment Program);
- Payments received on or after January 1, 1989, from the Agent Orange Settlement Fund or any other fund established pursuant to the settlement in the In Re Agent Orange product liability litigation,M.D.L. No. 381 (E.D.N.Y.);
- Earned income tax credit refund payments received on or after January 1, 1991, including advanced earned income credit payments;
- The value of any child care provided or arranged (or any amount received as payment for such care or reimbursement for costs incurred for such care) under the Child Care and Development Block Grant Act of 1990;
- Payments received under programs funded in whole or in part under the Job Training Partnership Act (employment and training programs for Native Americans and migrant and seasonal farm workers, Job Corps, state job training programs and career intern programs, AmeriCorps);
- Payments by the Indian Claims Commission to the Confederated Tribes and Bands of Yakima Indian Nation or the Apache Tribe of Mescalero Reservation;
- Allowances, earnings, and payments to AmeriCorps participants under the National and Community Service Act of 1990;
- Any allowance paid under the provisions of 38 U.S.C. 1805 to a child suffering from spina bifida who is the child of a Vietnam veteran;
- Any amount of crime victim compensation (under the Victims of Crime Act) received through crime victim assistance (or payment or reimbursement of the cost of such assistance) as determined under the Victims of Crime Act because of the commission of a crime against the applicant under the Victims of Crime Act; and
- Allowances, earnings, and payments to individuals participating in programs under the Workforce Investment Act of 1998.
In an "as-paid" jurisdiction, welfare assistance for housing costs is established separately from the rest of the welfare assistance and may be adjusted based on the actual cost of the family's housing. For welfare recipients, PJs in "as-paid" jurisdictions must count the following as income
- the amount of general assistance the family receives,
- the maximum amount of housing assistance the family could receive (rather than the amount the household is actually receiving).
Treatment of Assets
When using the Part 5 definition of annual income, PJs must determine the answers to the following three questions regarding family assets:
- What should be included as an asset?
- How should the value of the assets be computed?
- How should the actual income from assets be determined for inclusion in the annual income calculation?