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Cha • • <br />pter Three <br />CALCULATING ANNUAL (GROSS) INCOME <br />As discussed in Chapter One, the HOME <br />Final Rule gave PJs the flexibility to choose <br />one of three definitions of annual income to <br />determine whether households are eligible <br />for participation in the HOME Program. The <br />three definitions are: annual income as <br />defined in 24 CFR Part 5 (Part 5. annual <br />income), annual income as reported under <br />the Census long form for the most recent <br />decennial census, and adjusted gross <br />income as defined for purposes of reporting <br />under Internal Revenue Service (IRS) Form <br />1040 series for individual federal annual <br />income tax purposes. <br />PJs may use more than one definition within <br />their HOME Program in its entirety. For <br />example, a PJ may decide to continue to <br />use the Part 5 definition of income for its <br />rental projects and TBRA program, and use <br />the Census Long Form definition within its <br />homebuyer and owner -occupied <br />rehabilitation programs. <br />PJs must ensure that applicants to their <br />HOME -funded programs and activities are <br />treated equitably. For this reason, the <br />same income definition must be used within <br />a particular program or activity. For <br />example, if a PJ decides to use the Part 5 <br />definition of annual income for its <br />homebuyer program, it must use this <br />definition for all applicants to the homebuyer <br />program. It may not use the Census <br />definition for one applicant and the Part 5 <br />definition for another applicant. <br />Chapter Two discussed how and when <br />income information must be verified. This <br />chapter provides detailed guidance about <br />calculating annual (gross) income using <br />each of the three allowable definitions. <br />DEFINITION 1: ANNUAL INCOME AS <br />DEFINED IN 24 CFR PART 5 <br />The annual income definition found at 24 <br />CFR Part 5 is used by a variety of Federal <br />programs including Section 8, public <br />housing and the Low Income Housing Tax <br />Credit Program. Annual income is used to <br />determine program eligibility and, in some <br />programs, the level of assistance the <br />household will receive. This definition was <br />formerly commonly referred to as the <br />Section 8 definition. <br />The Part 5 definition of annual income is the <br />gross amount of income of all adult <br />household members that is anticipated to <br />be received during the coming 12 -month <br />period. Each of the italicized phrases in this <br />definition is key to understanding the <br />requirements for calculating annual income: <br />• Gross amount. For those types of <br />income counted, gross amounts (before <br />any deductions have been taken) are <br />used; <br />• Income of all adult household <br />members. The Part 5 definition of <br />annual income contains income <br />"inclusions" — types of income to be <br />counted — and "exclusions" — types of <br />income that are not considered (for <br />example, income of minors); and <br />• Anticipated to be received. The Part <br />5 annual income is used to determine <br />eligibility and the amount of Federal <br />assistance a family can receive. A PJ <br />must, therefore, use a household's <br />expected ability to pay, rather than past <br />earnings, when estimating housing <br />assistance needs. <br />Technical Guide for Determining Income and Allowances for the HOME Program — 11 <br />