Household Income Calculation and Determination

4 Household Income Calculation and Determination

Household income at the time of application and household size is compared to local income data to determine eligibility for Housing Recovery Program (HRP) funds. The HRP income calculation begins by using the Adjusted Gross Income (AGI) found on Line 11 of the most recent IRS form 1040, and may require review of additional documents to project income, depending on whether or not there is a change in income since the most recent tax filing. 

Steps for calculating household income using the IRS 1040 process:

1. Determine whose income is contributing to household income: collect most recent forms
2. Anticipate household income
   - If no change or projected change, household certifies 
   - When income changes, forecast 12 months of income for each household member
3. Verify income: using tax forms or other documentation
4. Review and verify income documents
5. Compare household income to AMI for that county
6. Certify household income level at time of application

Household income Inclusions - Household income categories may include, but are not limited to the taxable amount of the following:

• Wages, salaries, and tips
• Interest
• Ordinary dividends
• Business income (or loss)
• IRA distributions, pensions, and annuities
• Social Security benefits
• Capital gains or other gains (or loss)
• Unemployment compensation
• Prizes, awards, gambling, lottery, or raffle winnings
• Alimony received, if subject to income tax

Household income exclusions - These include but are not limited to the following as shown on the most recent 1040, schedule 1 line 26:

• IRA deductions
• Medical savings account deductions
• 50% of self-employment taxes
• Self-employed health insurance deductions 
• KEOGH and self-employed SEP and SIMPLE plans
• Penalties on early withdrawal of savings
• Paid alimony and child support if included on the tax return
• Payments for the care of foster children or foster adults

Other exclusions:

• VA Benefits
• Non-Taxable Income
• One-time lump-sum additions to family assets, such as inherited money or property, insurance payments (including payments under health and accident insurance, life insurance, and worker’s compensation), one-time gains from the sale of assets, and settlement for personal or property losses
• Full amount of student financial assistance paid directly to the student or educational institution
• Temporary, nonrecurring, or sporadic income (including gifts)

Applicants only eligible for Traditional Loans:

If after household income review, the applicant is eligible to receive only the repayable traditional loan, then the Program will streamline the estimating process by using the greater of the estimation software value or the construction bid provided.