Chapter IV: Income – Allowances, Assets, Expenses, Verifications and Calculations

Effective: September 2009

Section B: Income Includes

Annual income includes, but is not limited to, the full amount received (before taxes or other deductions), of wages and salaries, overtime pay, commission, fees, tips, and bonuses, and other compensation for personal services, which are

  • Received by, or paid on behalf of, the family head of household, co-head, or spouse (even if temporarily absent), or to any other family member over 18 years of age,
  • Acquired through assets owned by dependent family members; and/or anticipated to be
  • Received from a source outside the family during the 12-month period following admission or re-examination; and/or
  • Derived during the 12-month period from accessible assets; and
  • Not specifically excluded by HUD.

Income includes the following:

1. Adoption Assistance Payments - Include only the first $480 per year for each adopted child.

2. Annuities - A written contract establishing a right to receive specified, periodic payments for life or for a term of years. If one lump sum is received, the payment is considered an asset, not income.

3. Bonuses - Include the full amount of the bonus (even if a lump sum), before any payroll deductions.

4. Business and Property Income - Include net income (gross income less allowable expenses) from the operation of a business or profession (including self-employment) or from rental, real, or personal property.

  • Allowable expenses include interest payments on loans, straight-line depreciation of assets (as allowed by the IRS), etc.
  • Costs for business expansion or improvements are not allowable expenses.
  • Withdrawal of cash or assets from the operation of a business or profession is included as income except when the withdrawal is for reimburse­ment of amounts the family invested in the business.
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5. Child Support and Alimony - Child support and alimony generally qualify, as “irregular income” because large arrearages in payments owed to HCV recipients is common. Unless the HA can verify that payments are made at the full court-awarded amount on a regular basis, calculations of child support and alimony received must be handled as “irregular income ” calculations. The HA should directly ask the applicant/participant if there is an arrearage and explain that calculations must be based on actual income received. Failure to calculate child support and alimony in this manner often penalizes the tenant for income not received (when the court-awarded amount is higher than actual payments received).

  • It is imperative that the HA obtain as much information as possible from the list of acceptable verifications shown below before calculating such income. The HA must watch for court-imposed fees added to the amount of child support/alimony collected by Friend of the Court. Do not include these fees in income calculations.
  • The tenant always has the right to request an interim revision if an income change occurs during the course of a re-examination period. If child support/alimony income is calculated inaccurately due to an arrearage not taken into account, or an arrearage develops subsequent to an annual re-examination, the HA will process an interim revision upon request of the tenant. If a year-to-date total of child support/alimony is shown on the verification provided, the income must be annualized. HA may use Verification of Child Support Income (MSHDA 482).

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6. Commissions - Include full amount.

7. Death Benefits - See Item entitled "Retirement Funds, Pensions, Periodic Payments, Disability or Death Benefits, and Veterans Payment" and item entitled "Social Security, SSI, and Other SSA benefits".

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8. Dependent Income - The following income must be included:

  • Unearned income of minors, such as Social Security or SSI benefits;
  • Income from assets owned by minors;
  • For each full-time student age 18 or older, count earned income up to a maximum of $480 per year. If the student is the head of household, co-head, or spouse, count all income. Students must provide School Verification (MSHDA 55) and Verification of Earnings (MSHDA 49).
  • Refer to the section on Chapter IV. Income Excludes, Earned Income Disregard for procedures to follow when a dependent with disabilities has earned income.
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9. Educational Assistance (Students) -

  • Any financial assistance under the Higher Education Act of 1965 (e.g. Pell Grants, federal work study program, Federal Supplement Educational Opportunity Grants, Academic Achievement Incentive Scholarships, State Assistance under the Leveraging Educational Assistance Partnership Program); from private sources (non-governmental sources of assistance) such as a trust, or a corporation, or an individual (parent, guardian, or other family member whether residing within the family in the HCV assisted unit or not, and/or from other persons not residing in the unit); or, from an institution of higher education as deined by the Higher Education Act of 1965 in 20 U.S.C. 1001 and 1002; that an individual (full or part-time student) receives in excess of amounts received for tuition shall be considered income to that individual.

For persons over the age of 23 with dependent children, the financial assistance described above is not considered annual income.

For full-time dependent students (age 18 and older) living with their parents where the parent(s) are the voucher holder and individually or jointly meet eligibility criteria, see dependent income above.

Financial assistance does not include loan proceeds.

Athletic Scholarship: In accordance with the FY 2005 Appropriations Act, it is required that the portion of any athletic scholarship assistance available for housing costs be verified by MSHDA with the third party income source and included in the determination of family adjusted income. MSHDA will deny housing assistance to those college students receiving athletic scholarship assistance with $5,000 or more annually available for housing costs.

10. Fees - Include full amount before any payroll deductions.

11. Gifts and Contributions - Any gift or contribution received on a regular and on-going basis is considered income.

  • The amounts are considered income even if not monetary (food, vehicle payments, rent or utility payments, etc.).
  • If the family’s expenses exceed its known income, HA will inquire about gifts and contributions. HA may have tenant complete and return the Verification of Income from Contributions (MSHDA 486) to verify contributions.
  • Do not include sporadic gifts or casual contributions.

12. Insurance Policies - Include payments received on a regular basis as a result of an insurance claim as income. If one lump sum is received, the payment is considered an asset, not income.

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13. Interest and Dividends from Family Assets - Include withdrawal of cash or assets from an investment as income except when the withdrawal is reimbursement for cash or assets invested by the family.

Calculating Interest and Dividends from Family Assets:

  • Include the actual income from assets as income when family assets are $5,000 or less.
  • When family assets are more than $5,000, use the greater of:
    • Actual income from assets, or
    • Imputed income from assets based upon passbook rate determined by HUD. (To calculate imputed income, multiply total cash value of assets by current HUD approved passbook rate.)
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14. Military Pay - The following income must be included:

  • Any military pay including Coast Guard, National Guard, and Reserve pay.
  • Veterans Affairs (VA) and GI payments, which are generally received after separation of service.
  • Full amount of military pay and allowances of head of household, spouse or co-head, whether or not living in the dwelling unit.
  • Full amount for any family member who is identified on the Lease Agreement, Family Composition form, and any subsequent documents and who is temporarily (less than 90 calendar days) away from the home.
  • HA may use Verification of Military Pay (MSHDA 485) for TPV.
  • Enlistment bonuses must be included in annual income. (A lump sum enlistment bonus is not specifically excluded by 24 CFR 5.609(c)(3) so therefore must be counted.)
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15. Retirement Funds, Pensions, Periodic Payments, Disability or Death Benefits, and Veteran’s Payments

  • On-going income from these sources is included in income calculations.
  • The definition of disability used by the agencies issuing these types of benefits does not match the definition used by HUD. Therefore, receipt of any of these types of benefits is NOT automatic verification of disability for purposes of granting the $400 Elderly/Disabled (ED) allowance. To qualify for the ED allowance, a recipient of these types of benefits must have a Verification of Disability and/or Special Needs form (MSHDA 16) that has been completed by a licensed health care professional on file. The MSHDA 16 needs to be “permanent” or completed annually.
  • HA may use Verification of Pension or other Income (MSHDA 483) and/or Verification of Veterans Benefits (MSHDA 484) for TPV.
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16. Self-Employment - Only the net income – Adjusted Gross Income (AGI) less expenses from a business is included in annual income.

When Federal Income Taxes have been or will be filed:

  • Obtain a photocopy of a signed U.S. Individual Income Tax Return (Form 1040) filed by the applicant/participant for the previous year.
  • Review all appropriate schedules (Schedule C, Profit or Loss from Business; Schedule E, Rental Property Income; Schedule F, Farm Income; Form 4562 Depreciation and Amortization etc.).
  • Add any unallowable expenses back into the AGI. See non-eligible deductions below.

When Federal Income Taxes have not or will not be filed:

  • If monthly statements are maintained, a minimum of the four most recent monthly statements is required. The statements must identify profits, losses, and net income, and be signed and dated by the applicant/participant.
  • If monthly statements are not maintained, a notarized self-employment certification/statement is required. It must cover at least a four month period and be signed and dated by the applicant/participant.
  • Calculate AGI by deducting verified allowable expenses from gross income identified from the self-employment statement.

If the applicant/participant is operating the business from the assisted unit, and an amount is indicated on Schedule C, the following deductions must be added back into the AGI:

  • Rent on business property
  • Utilities (telephone, electric, gas, etc)
  • Expenses for business use of home.
  • If the applicant/participant is operating the business from a separate office/business space, expenses for rent or ownership are eligible tax deductions (as allowed and defined by the IRS).

Non-eligible deductions

The following are non-eligible HCV program deductions and need to be added back into the AGI. They are eligible IRS deductions and will appear on Schedule C or other appropriate schedules:

  • Depreciation, as identified on Schedule C, in Part II. Depreciation is allowed by the IRS, but is not an out-of-pocket expense; this must be considered as income.
  • Payments on loans, including principal and interest.
  • Expenses/outlays for business expansion and capital improvements, including interest on business indebtedness.
  • Self-employed health insurance deduction on Federal 1040. If the family qualifies for medical expense deductions, add this amount to the medical expenses.
  • A few minor costs identified on Schedule C, such as legal and professional services, etc.
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17. Severance Pay – Include payments received.

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18. Social Security (SS), Supplemental Security Income (SSI), and Other Social Security Administration (SSA) Benefits

In an effort to eliminate the time consuming manual requests for benefit verifications from public housing authorities across the nation, SSA provides HUD with benefit information on all current participants and household members who have disclosed a valid social security number. HUD makes this information available to public housing authorities administering the HCV program through the HUD EIV system. The HUD EIV system assists in the verification of SSA benefits by comparing data from the HUD 50058 form to data reported by the SSA. Therefore, this informtion is not available for applicants or participants who just started receiving payments. Verify SSA benefits for participants undergoing re-examination using the HUD EIV system.

If the SS information is not available through the EIV method, the HA should request a current SSA benefit verification letter (dated within 60 days of voucher issuance) from each household member that receives SSA benefits so the HA and MSHDA do not incur the cost of a TPV of SSA/SSI benefits. If the participant and/or household members are unable to provide the requested document(s), the applicant/participant/household member should be instructed to call the SSA at 1-800-772-1213 (available 24 hours/7 days a week) to request a benefit verification letter OR, make the request for a benefit verification letter via the SSA internet website at www.ssa.gov. There is no cost for this verification letter to the applicant/participant/household member. From the front page of the Social Security online website, go to the left hand side of the page and under the column "Things You Can Do Online", click on Get a Proof of Income Letter. Upon receipt of the letter, applicant/participant/household member should provide the HA with the original benefit verification letter. The HA should make a copy of the original benefit verification letter, return the original letter to the applicant/participant/household member, and maintain the photocopy of the benefit letter in the tenant file with the date noted as to when the original copy of the benefit letter was viewed.

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19. Stipends - A periodic stipend received by a family member from a non-profit organization for a volunteer service would be included as income unless it is specifically excluded under 24 CFR 5.609(c)(17). Obtain information from the non-profit organization about the source of its funding to determine whether or not the stipend should be included as income. For example, if funding for the stipend is provided under the Domestic Volunteer Services Act of 1973 or the Older Americans Act of 1985, you must exclude it.

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20. Temporary Assistance to Needy Families (TANF) – TANF is commonly known as “Welfare,” “Aid for Dependent Children,” or “ Family Independence Program (FIP)” grant, and is received through DHS. Grants include cash, payments, vouchers, and other forms of benefits designed to meet a family’s ongoing basic needs (i.e. food, clothing, shelter, utilities, and household goods). Benefits also include payments made on behalf of DHS or as a condition of employment or community service and may include child care, transportation assistance, and other supportive services.

Acceptable verification includes:

  • DHS caseworker provides completed MSHDA 107,
  • A DHS computer printout, or
  • Verbal verification (which must be documented on a MSHDA 77). If verbal information is received, the name and title of the individual providing information is required to be documented. Information obtained must be documented on a MSHDA 77.
  • Compare grant information to the charts found in the Appendix, Flat Grants. Investigate and document any discrepancies to discover unreported income and/or unreported family member changes.

Note: Applicants/participants are not required to apply for welfare benefits.

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21. Tips - Include full amount before any payroll deductions.

22. Unemployment Benefits

  • Include lump sum payments caused by a delay in processing (including benefits for an “exempt” job);
  • Multiply gross weekly benefit by 52 weeks, regardless of the number benefit weeks remaining; and
  • When the family reports the benefits have ceased, complete an Interim Revision to adjust annual income. Refer to PPM, Chapter IX.
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23. Wages/Salary - Anticipated gross amounts prior to payroll deductions or garnishments, including:

  • Overtime;
  • Commissions;
  • Bonuses;
  • Tips or other compensation for personal services;
  • Projected pay increases/raises;
  • For any exempt earned income, refer to the section of this chapter on Income Excludes.
  • See PPM chapter on Income Excludes - Earned Income Disregard for information on when not to include wages earned by disabled family members.
  • For calculation of School Employment, see PPM chapter on Income Verifications - Irregular Income.
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24. Worker’s Compensation - Lump sum Worker’s Compensation payments are not added to income; but should be included as an asset. This includes benefits for an “exempt” job.

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25. Veterans Administration Benefits - Benefits received under the VA’s Incentive Therapy (IT) and Compensated Work Therapy (CWT) programs are included in the calculation of annual income.

Veterans payments: Ongoing, periodic amounts are included in annual income. A lump-sum payment or prospective monthly amounts for the delayed start of a periodic payment must be included in annual income.

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