Under the mandatory earned income exclusion, what is the definition
of "previously unemployed"
The definition of previously unemployed is found in 960.255(a),
and is as follows: "includes a person who has earned, in
the twelve months previous to employment, no more than would be
received for 10 hours of work per week for 50 weeks at the established
minimum wage." The established minimum wage means the federal
minimum wage unless there is a higher state or local minimum wage.
Does the earned income exclusion apply to minors who turn 18?
Yes, the earned income exclusion applies to anyone who meets the
criteria outlined in 24 CFR 960.255. The test that must be applied
in this case is whether the person meets one of the three qualifying
factors and is there is new or increased earned income after the
person turns 18. If yes, EID applies. If no, EID does not apply.
17-year old who has been making $1,500 per year while in high
school, graduates and turns 18 years old and begins making $10,000
per year. This person will qualify for EID because he meets
the qualifying factor of being previously unemployed and has
experienced an increase in earned income.
example, a 17 year old (not a fulltime student) is making $12,000
per year, and turns 18 years old and is still making $12,000
per year. This person does not qualify for EID because she does
not experience an increase in earned income nor does she meet
one of the three qualifying factors.
At reexamination, if some members of a household have increases
in their income, and those household members are not entitled
to the disregard, how does this affect the rent at the second
twelve-month exclusion and phase-in period?
Any increases in income of family members who are not eligible
for the earned income disregard will be considered in determining
the family's rent.
At a family's last reexamination effective 1/1/2000, the family
is receiving welfare assistance. When the family is reexamined
for 1/1/2001, a member of the family has earnings after being
previously unemployed for twelve months. This change occurred
on 6/15/2000, but the family was not required to report it. Now
it is being reported for the reexamination effective 1/1/2001.
How is the earned income exclusion benefit processed?
By not reporting the increase, the family has received the benefit
for the 6 months prior to the reexamination. The family is entitled
to 100 percent of the disregard of any incremental increase for
the remaining six months. At the end of the six months, the family
is then entitled to the 12 month 50% disregard of the incremental
What should PHAs use as a guide in determining what constitutes
a "qualifying" training or economic self-sufficiency
An "economic self-sufficiency" program is defined at
24 CFR 5.603(b) as follows: "Any program designed to encourage,
assist, train, or facilitate the economic independence of HUD-assisted
families or to provide work for such families. These programs
include programs for job training, employment counseling, work
placement, basic skills training, education, English proficiency,
workfare, financial or household management, apprenticeship, and
any program necessary to ready a participant for work (including
a substance abuse or mental health treatment program), or other
Is there a time limit on how long a resident can be unemployed
to be eligible for the earned income exclusion?
There is no maximum time limit on how long a resident can be unemployed.
However, he/she must have been unemployed for at least the last
12 months, as unemployment is defined in the regulations.
Can a PHA exclude the income of a former welfare recipient who
is now employed with PHDEP or other grant funds?
Yes, provided the resident meets the definition of eligibility
for a qualified family at the time the provision became effective.
An individual who was never previously employed obtains his or
her first job, but is still receiving a regular monthly income
benefit from welfare. Is this individual entitled to the income
Yes, the individual is eligible for the earned income disregard
based on the following criteria stated in 960.255(a)(iii):
annual income increases as a result of new employment or increased
earnings of a family member, during or within six months after
receiving assistance, benefits or services under any state program
for Temporary Assistance to Needy Families funded under Part
A of title IV of the Social Security Act, as determined
by the PHA in consultation with the local agencies administering
temporary assistance for needy families (TANF) and Welfare to
Work (WTW) programs. The TANF program is not limited to monthly
income maintenance, but also includes such benefits and services
as one-time payments, wage subsidies and transportation assistance-provided
that the total amount over a six-month period is at least $500."
Does the $500 minimum dollar requirement apply only when a family
is seeking to qualify for the disregard on the basis of receipt
of one-time TANF benefits or ancillary benefits such as transportation
assistance, (and not to the receipt of monthly TANF income maintenance
Yes, the minimum $500 requirement applies only to one-time benefits,
wage subsidies, and transportation. A person receiving regular
monthly income maintenance (cash assistance) during or within
the six-month period since first receiving assistance is eligible
for the disallowance even if the amount received is less than
An individual is working but also receiving TANF benefits. If
the individual's income increases, and as a result, the individual
loses the TANF benefits, does the individual qualify for the income
Yes, the individual is eligible for the income disregard based
on an increase in income as a result of new employment within
six months of receiving TANF.
What happens if a family met the requirements for the previous
18-month income disregard and was processed by the PHA and scheduled
to go into effect as of October 1, 1999, but the family was not
eligible for the new income disregard at the time? Can this family
still take advantage of the 18-month income disregard?
If the family met the requirements at the time the previous 18-month
disregard policy was in effect, it should be applied to determine
the family's rent for the next 18 months.
tenant began work in August 1999 after completion of a training
program in June that qualified under PIH 98-2 for the old 18-month
disregard. (She was not unemployed for the prior 12 months,
nor did any member of the family receive benefits under the
state TANF program in the prior 6 months.) She reported her
earnings at the end of August and the PHA processed the paperwork
for a rent increase beginning October 1, 1999. Since the tenant
qualified for the 18-month disregard while it was in effect,
she is entitled to receive the benefit of it. Her rent should
not be increased due to earnings for 18 months. (Note: Beginning
work after completion of a training program qualified a resident
for the old 18-month disregard, but would not qualify a resident
for the new earned income disregard.)
What rent policy should be applied if a family who completed a
qualifying training program prior to October 1, 1999, did not
have increased earnings until after October 1, 1999?
family's eligibility for the new earned income disregard must
be based on one of the three criteria outlined in 960.255. Because
the resident "completed" training prior to October 1,
1999, the resident would not be eligible for the new earned income
disregard related to participation in a training program, as the
increased earnings must occur "during" participation
in an economic self-sufficiency or other training job. However,
the tenant may still be eligible for the earned income disregard
based on one of the other two criteria-previously unemployed for
at least 12 months or receiving TANF within the last six months.
tenant completed a qualifying training program in June, but
did not start her new job until October. The tenant did not
"qualify" for the 18-month disregard prior to October
1, 1999 because her employments began in October. Therefore,
he eligibility for an income disregard is determined by whether
she qualifies under the new disregard policy effective October
1, 1999. A 4-month lag between the completion of the training
program and the start of employment means the tenant is not
qualified for the new disregard based on participation in a
training program. The tenant's eligibility depends on whether
she had received benefits under a state TANF program in the
prior 6 months or had been "unemployed" for the prior
What rent policy applies to a family that is in the midst of receiving
the old 18-month income disregard when the new disregard policy
goes into effect as of October 1, 1999?
The old 18-month income disregard continues to apply to the family.
of October 1, 1999, a family has been receiving the benefit
of the 18-month disregard for 7 months. Instead of applying
the new disregard, the PHA should continue to give the family
the benefit of the old disregard policy for an additional 11
of October 1, 1999, the family has been receiving the benefit
of the old
18-month disregard for 13 months. Does it matter that the family
had been receiving the benefit of the old disregard more than
12 months? No. The family continues to receive the benefit of
the 100 percent disregard of any incremental increase in income
for the next 5 months.
Would the income of a person who received TANF due to pregnancy
leave or working for the school system be excluded in the same
way as a person who is eligible for an income exclusion if she
was receiving TANF within the past 6 months of receiving income?
Yes, a person who experiences increases in income from new employment
or increased earnings from existing employment during or within
six months of receiving TANF benefits, regardless of the reason
for the benefits.
When does the earned income disallowance go into effect?
The initial 12-month cumulative period begins on the date a member
of a qualified household is first employed or first experiences
an increase in annual income attributable to employment. However,
for tracking and administrative purposes, PHAs can begin EID on
the first day of the month following the effective date of employment.
Additionally, at the onset of the 50% cumulative exclusion period
and throughout, it is advisable for PHAs to conduct interim reexaminations
to better ensure accuracy in income and rent determination.
Does the new disregard apply to a tenant who has income from both
TANF and employment, beginning prior to October 1, 1999, but then
experiences an increase in earnings from work after October 1,
The new income disregard applies; tenants whose earnings increase
while on TANF are eligible for a disregard of their increased
income due to earnings.
A tenant has a 20-hour/week job for which she earns $550 per
month (she did not receive the 18-month disregard) and receives
$200/month in TANF benefits. Beginning November 1, 1999 the
employer increase her hours to 35 per week with a slight pay
increase for a total of $1000 per month and she stops receiving
the TANF benefits. The new disregard applies to her increase
in income due to earnings. Under the regulations, $250/month
of the increase in earnings is excluded from her annual income
to determine her rent, because that is her increase in income
(as opposed to the increase in earnings). The annual income
used to determine her rent is 12 times the previous $750/month
of income. Her rent would remain what it was in October 1999
(assuming no other changes in income or family composition),
because the October and prior rent was based on the previous
gross income of $750/month.
Does a family receive the benefit of the income disregard if the
family experiences a increase in earnings within six months of
receiving a non-cash TANF benefit, such as a $600 payment to an
auto shop for repairs to the tenant's car so she could start a
Yes, receipt of at least $500 in TANF benefits is sufficient to
trigger the disregard. To verify which benefits are funded under
the state's TANF program, contact your state or local welfare
In determining a family's eligibility for the income disregard,
must the member of a household who gets a job or increased earnings
be the same member of the household who received TANF benefits?
Yes. Only members of a qualified family who are also TANF recipients
can receive the disregard based on the qualifying factor related
to new employment or an increase in income during or within six
months of receipt of TANF.
EID is considered to be exclusively part of the income-based rent
formula. As such, what happens when a family who has qualified
for (and/or received the disallowance) chooses flat rent? Two
scenarios are presented below.
A family qualified for EID and had experienced several months
of the full exclusion. Then, due to an income increase which is
not affected by EID they elect to pay flat rent. Until that time
the clock was ticking on their 48-month lifetime disallowance
period. Now that they are paying flat rent, is the 48-month period
suspended or does it continue?
The 48 month clock continues. As long as the employment continues,
the fact that the family opts to pay a flat rent doesn't stop
any clock--the 100% exclusion, 50% exclusion, or overall 48 months.
The only difference is that the family opted to pay the flat rent
over the income-based rent (which was calculated taking the exclusion
amounts into account).
A family has elected to pay flat rent. They have been paying flat
rent for several months when a family member experiences an earned
income increase which would qualify the family for EID. Would
the 48-month period commence even though while on flat rent they
are not experiencing the disallowance of income? Or would it begin
only if they were paying income-based rent? Let's say later they
choose to pay income-based. Would the 48-month period begin (1)
retroactive to when they qualified, (2) at the onset of income-based
rent, or (3) would they have to wait for another qualifying increase
while on income-based rent to begin the disallowance?
If a family is paying the flat rent at the time a family member
experiences an event that would qualify them for EID, unless the
event happens to coincide with their annual reexamination (and
annual choice of rent), the family cannot opt for the income-based
rent. Therefore, they cannot take advantage of the EID and the
48-month clock does not begin. If the family later chooses to
pay income-based rent, they would only qualify for the EID if
another qualifying event occurred.
If a person loses welfare income due to a work-related sanction,
is the person eligible for the income disregard if they obtain
The individual receives the benefit of the disregard when they
go to work if the person received TANF benefits within the previous
6 months (including such benefits and services as one time payments,
wage subsidies and transportation assistance that total at least
$500 over a 6 month period). The purpose of the policy of not
reducing a tenant's rent, when the tenant experiences a work-related
sanction, is to reinforce the welfare agency's incentives for
the tenant to obtain employment. If the individual obtains employment,
the policy has achieved its intended result.
family's $500/month TANF benefits were terminated in October
1999 due to failure cooperate with work requirements. Under
the new imputed welfare income policy, the PHA kept the family's
rent at the prior level of $125/month. While the family was
still subject to the welfare sanction, in December 1999, the
mother got a part-time job earning $700/month. Since the mother
began employment within 6 months of receiving TANF benefits,
she is entitled to the disregard of the difference between her
earnings and her prior TANF income - or $200/month, in the determination
of her annual income for 12 months, and the disregard of $100/month
in the subsequent 12 months.
EID regulations state that the 48-month window of opportunity
is a once in lifetime opportunity. If a household qualifies and
the PHA opens their window of opportunity and the client moves
out before the 48 months ends, do they lose the remainder of their
window of opportunity? Or could they resume their unused months
if they move to another PHA within the 48-month window of opportunity
and again qualify for the EID after they are admitted
Yes. According to the regulations, the tenant is entitled to a
lifetime limit of 48 months of the earned income exclusion. In
this case, it would be the tenant's responsibility to inform the
new PHA that the 48-month EID exclusion clock has been started.
The PHA will then verify this information with the PHA where EID
was previously processed.
Is a tenant eligible for the income disregard if she obtains a
job 2 months after completion of the coursework portion of a vocational
school program while she is receiving job search and counseling
assistance from the program?
Yes. Because she is still receiving services from the training
program, she has started a job during the program and is entitled
to the disregard.
If a PHA does not perform interim reexaminations and increases
rents only at the family's annual reexamination, why does EID
begin on the first day of the month following the increase in
A23: According to the regulation, the exclusion actually begins
on the date the family is first employed or first experiences
an increase in income attributable to employment. However, for
administrative and tracking purposes, the PHA can begin the exclusion
on the first of the month following the employment or increase
in income. Note: If a person who qualifies for EID begins employment
or experiences an increase in income and fails to report this
change, the PHA will count this time against the family member's
Does "training" sufficient to trigger the income disregard
includes community college when the tenant is not in a special
Yes, as long as it meet the definition of economic self sufficiency
5.603(a): "Any program designed to encourage, assist, train,
or facilitate the economic independence of HUD-assisted families
to provide work for such families. These programs for job training,
employment counseling, work placement, basic skills training,
education, English proficiency, workforce, financial or household
management, apprenticeship, and any program necessary to ready
a participant for work (including a substance abuse or mental
health treatment program), or other work activities."
How should a PHA treat income earned in a sheltered workshop-type
A sheltered workshop could qualify as a training or economic self-sufficiency
program if it met the definition of an economic self-sufficiency
program at 24CFR5.603(b). Income earned in this setting therefore
could trigger the mandatory disregard.
Are PHAs required to provide tenants with notice about the new
mandatory income disregard policy?
As part of the information given to tenants under the rent choice
requirement, the PHA must explain the income disregard policy
to the tenant and provide a written notice of the income-based
rent as calculated by the PHA. The determination of the income-based
rent must include the proper treatment of income under all applicable
Can a tenant who is informed he/she has a new job (that would
qualify for the disregard) starting in a few weeks choose to pay
the rent increase and have the equivalent funds place in an Individual
Savings Account (ISA) instead of receiving the disregard?
If the PHA offers a choice between the new optional ISA and the
earned income disregard then the tenant has the option to request
that the funds that would otherwise be disregarded be placed in
the ISA on their behalf.
CFR 24 960.255(d) states "As an alternative to the disallowance
of increases in income as a result of employment
a PHA may
choose to provide for individual savings accounts for public housing
residents who pay an income-based rent
"At the option
of the family, the PHA must deposit in the ISA the amount that
would have been included in tenant rent payable to the PHA as
a result of the increased income that is disallowed
If a tenant who qualifies for the earned income disregard based
on previous unemployment gets an increase in wages or salary in
the 14th month after the disregard began to apply, does her rent
Yes, if the PHA policy calls for interim reporting of increases.
The disregard that began when the rent increase from her new employment
would have taken effect still applies. However, since it has been
more than 12 months since the disregard took effect, the PHA should
increase the rent by half the amount of what the new rent increase
would have been, based on the change of earnings.
How many times in a 48-month period can a family qualify for the
earned income exclusion?
A family member can only receive a total of 12 months for 100
percent of the incremental increase disregard, and 12 months of
the 50 percent disregard in his or her lifetime. The disregard
only applies for a maximum of 4 years from the time it is first
applied. Refer to 960.255(b)(3).
tenant who qualified for the mandatory disregard based on previous
unemployment works for 20 months and then is laid off. She received
12 months of the full disregard and 8 months of the 50 percent
disregard. The resident is called back to work in the 30th month
following initial employment. The resident is still entitled
to the remaining four months of the 50 percent disregard.
A tenant received TANF benefits of $500 per month from March 1999-August
1999, and at this point the tenant reached the state's TANF time
limit and benefits were terminated. The tenant got a job making
$600/month for September through November 1999. At the end of
November, the person quit that job and during the week before
Christmas started a new job paying $1200/month. Is the tenant
eligible for the disregard when she reports her new earnings in
Yes. The tenant qualifies for the income disregard because the
individual received TANF benefits within the 6-month period prior
to January 2000. In addition, in the 12 months prior to beginning
her new job, she earned on $1,800, which is less that 500 hours
at the federal minimum wage (currently $2,575) so she is considered
to be "previously unemployed."
If a tenant who qualified for the disregard gets a job after paying
a minimum rent, does her rent remain at the minimum rent level
for another 12 months (and then increase to half of what the rent
obligation would have been if all her income were considered?
Yes, For example, if a tenant's only income for 12 months prior
to getting a job was from child support, she would meet the eligibility
for the disregard as "previously unemployed." If the
amount of child support was sufficiently low (and remained unchanged)
that the family was subject to the PHA's minimum rent of $50 per
month, then her rent would remain at that level for 12 months
after her job began. In months 13-24 after her employment began,
her rent would be based on half her income (earnings plus her
child support income).
If a tenant is eligible for the earned income disregard, can the
disregarded amounts be used in determining the cap for the childcare
In the case of childcare necessary to permit employment, the amount
deducted shall not exceed the amount of employment income that
is included in annual income; therefore, the disregarded amounts
cannot be used in determining the cap for the childcare expense
deduction. (See definition of child care expenses at 24 CFR 5.603.)
resident is receiving the benefit of the new earned income disregard.
Her salary is $9,000/year, however, only $3,000 of this amount
is being included in annual income. The remaining $6,000 is
being disregarded. Childcare expenses for her four-year-old
daughter tot $3,640/year. The resident's childcare deduction
is capped at $3,000 because this is the amount that is included
in annual income.
Is a public housing tenant who received the first 18 month earned
income disregard also entitled to the new earned income disregard?
If a tenant meets the criteria for the new income disregard as
outlined in 24 CFR 960.255, a PHA cannot deny a tenant the disregard
based on receipt of the earlier 18-month exclusion.
is an example of an income disallowance used in the Public Housing
Reform Act Training:
has been unemployed for 25 months.
monthly TANF income is $540.
gets a job at the Chrysler plant, making $1,100 per month on
6/15/2000, and reports her employment immediately.
qualifies for a 12-month income disallowance of $560($1,100-$540).
rent continues to be based on $540.
is laid off on 9/15/00 and reports her layoff immediately.
has 9 months of full disallowance and 12 months of the 50% disallowance
is called back to work on 1/15/2001, at her $1,100 month salary
and she reports immediately.
rent is based on $540 until 10/15/2001 (the end of the 12-month
rent is based on $820 from 10/15/2001 through 1014/2002 (base
rent of $540 plus $280, which is 50% of the $560 disallowance.
rent is based on her full income beginning 10/15/2002.
is an example of an income disallowance and imputed welfare income:
Sandy's neighbor, John Hill.
Sandy, John was receiving TANF income of $540 per month.
June 1, 2000, John was sanctioned $140/month for failure to
comply with economic self-sufficiency requirements for 3 months.
rent is unchanged. It continues to be based on $540, even though
he is only receiving $400 for June through August.
told John about her great new job, so he applied to the Chrysler
's rent is still based on his pre-sanctioned welfare income
Sandy, he was laid off on 9/15/2000 and he reported this to
the housing authority immediately.
is called back 1/15/2001 at his old salary of $1,000 and reports
to the housing authority.
has 10 months of full disallowance left and 12 months of 50%
rent will be based on his old welfare income of $540 through
11/15/2001 and based on $770 through 11152002 (base rent of
$540 + $230, which is 50% of the $460 disallowance).
If a family was working, and then becomes unemployed, applies
for TANF, receives TANF for one month and then becomes employed
again, is the member entitled to the disregard.
Yes. The regulation states that a person is eligible if they have
experienced employment during or within 6 months after
receiving TANF assistance. This person is eligible for EID.
A tenant goes to work making $300/month that equals $3,600. This
tenant was previously receiving SSI and MFIP that added up to
$7,000 per year. Would this tenant be eligible for the Earned
Income Exclusion? Why or why not? In other words, does the tenant
have to make more money employed than not employed to be eligible
for the Earned Income Disallowance
Because the family's annual income increased, the family would
qualify for EID as long as the family met one of the three qualifying
factors. Here is how you would calculate the exclusion:
term "Qualifying Event" is used to mean the event that
took place that triggered EID (new employment, increase in income
during training program, etc.).
Qualifying Event (Baseline Income):
Annual Income of family member = $7000 (SSI)
Annual Income of family member = $10,600
of Exclusion = $3600 ($10,600 - $7000*)