1. (a)

   1. (1) Total income is gross income with no adjustments or deductions.
   2. (2) Tenant income is calculated in a manner consistent with the determination of annual income under Section 8 of the United States Housing Act of 1937 (Section 8), not in accordance with the determination of gross income for federal income tax liability.

   3. (3)

      1. (A) Annual income is the anticipated total income from all sources received by the family head and spouse (even if temporarily absent) and by each additional member of the family, including all net income derived from assets for the twelve-month period following the effective date of certification of income.
      2. (B) Certain types of income are excluded.

2. (b)

   1. (1) The LIHTC program refers to the current Department of Housing and Urban Development Handbook 4350.3 in utilizing its definition of income only.
   2. (2) Keep in mind that the LIHTC program is governed by I.R.C. § 42.
   3. (3) Owners or managers of mixed-use properties must comply with all applicable program rules and regulations.
   4. (4) Allowances used in some government programs, such as childcare, elderly status, medical expense, etc., are not deducted from the household's gross annual income to determine income eligibility for LIHTC units.
   5. (5) Owners must review the current version of the Department of Housing and Urban Development Handbook 4350.3 for a comprehensive discussion of income calculations.

3. (c) Annual income includes:

   1. (1)

      1. (A) The gross amount (before any payroll deductions) of wages and salaries, overtime pay, commissions, fees, tips, bonuses, and other compensation for personal services of all adults of the household (including persons under the age of eighteen (18) who are the head, spouse, or co-head).
      2. (B) Includes salaries of adults received from family-owned businesses;
   2. (2) Net income, salaries, and other amounts distributed from a business;

   3. (3)

      1. (A) Interest, dividends, and other net income of any kind from real or personal property (including income distributed from a nonrevocable trust).
      2. (B) This includes any withdrawal of cash or assets from an investment, except to the extent the withdrawal is reimbursement of cash or assets invested by the family.
      3. (C)
4. (i) Where the family has net family assets in excess of five thousand dollars ($5,000), annual income includes the greater of:
5. (a) (a) The actual income derived from all net family assets; or

6. (b) (b) A percentage of the value of such assets based on the current passbook savings rate, as determined by the Department of Housing and Urban Development.

   1. (ii) The current passbook rate is two percent (2%);

   2. (4)

      1. (A) The gross amount (before deductions for Medicare, etc.) of periodic Social Security payments (including the cents, do not round down).
      2. (B) This includes payments received by adults on behalf of minors for their own support.
      3. (C) Note. If Social Security is reducing a family's benefits to adjust for a prior overpayment, use the amount remaining after the adjustment for the overpayment;

   3. (5)

      1. (A) The full amount of periodic payments of 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 (other than deferred periodic amounts from Supplemental Security Income and Social Security benefits that are received in a lump sum amount or in prospective monthly amounts).
      2. (B) Count the total amount received.

      3. (C) Do not reduce the amount by any amounts the individual previously paid into the account in order to receive the:

         1. (i) Pension;
         2. (ii) Annuity; or
         3. (iii) Insurance policy;

   4. (6)

      1. (A) Payments in lieu of earnings, such as unemployment and disability compensation, workers' compensation, and severance pay, including delayed periodic payments received that would have been paid periodically but were paid in lump sum because of circumstances such as processing delays.
      2. (B) Count any payment that will begin during the next twelve (12) months;

   5. (7)

      1. (A) Welfare assistance.
      2. (B) If the payment includes an amount specifically designated for shelter and utilities and the welfare agency adjusts that amount based upon what the family is currently paying for shelter and utilities, special calculations are required.
      3. (C) If the welfare agency is reducing a family benefit to adjust for a prior overpayment, use the amount remaining after the adjustment for the overpayment;

   6. (8) Alimony and child support awarded to the household, unless the applicant:

      1. (A) Certifies that payments are not being made; and
      2. (B) Has taken all reasonable legal actions to collect amounts due, including filing with the appropriate courts or agencies responsible for enforcing payment;

   7. (9)

      1. (A) Alimony or child support paid by a member of the household is counted as income (not deducted from the income of the party paying such alimony or child support), even if it is garnished from wages.
      2. (B) For example, John Smith pays one hundred fifty dollars ($150) per month in child support. It is garnished from his monthly wages of nine hundred fifty dollars ($950). After the child support is deducted from his wages, Mr. Smith receives eight hundred dollars ($800). The owner must count nine hundred fifty dollars ($950) as John Smith’s monthly income;

   8. (10)

      1. (A) Recurring monetary gifts or contributions regularly received from persons not living in the unit.
      2. (B) Except, exclude from annual income recurring monetary contributions that are paid directly to a childcare provider by persons not living in the unit;

   9. (11)

      1. (A) Lottery winnings paid in periodic payments.
      2. (B) Lottery winnings paid in a lump sum are included in net family assets, not in annual income;
   10. (12) All regular pay, special pay, and allowances (including housing allowance) of a member of the United States Armed Forces (except the special pay to a family member serving in the United States Armed Forces who is exposed to hostile fire);
   11. (13) Relocation payments made pursuant to Title II of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970; and

   12. (14)

       1. (A) Actual income distributed from trust funds that are not revocable by or under the control of any member of the tenant family.

       2. (B) Note. Even if family assets exceed five thousand dollars ($5,000), use actual income distributed from the irrevocable trust.

          1. (d) Educational scholarships or grants. The treatment of educational scholarships or grants is dependent on whether the student is receiving Section 8 assistance.

7. (e) Not receiving Section 8 assistance.

   1. (1) All forms of student financial assistance, no matter how it is used, are excluded from annual income.

   2. (2) Financial assistance includes:

      1. (A) Grants;
      2. (B) Scholarships;
      3. (C) Educational entitlements;
      4. (D) Work-study programs; and
      5. (E) Financial aid packages.
   3. (3) It does not matter whether or not the assistance is paid to the student or directly to the educational institution.

8. (f) Receiving Section 8 assistance.

   1. (1) All financial assistance received from the following sources in excess of tuition is included in income:

      1. (A) The Higher Education Act Assistance under the Higher Education Act of 1965, including:

         1. (i) Pell Grants;
         2. (ii) Federal Supplemental Educational Opportunity Grants;
         3. (iii) Academic Achievement Incentive Scholarships;
         4. (iv) State Assistance Partnership Program;
         5. (v) The Robert G. Byrd Honors Scholarship Program; and
         6. (vi) Federal Work-Study programs;

      2. (B) Private sources (nongovernmental) of assistance, including assistance provided:

         1. (i) By a parent, guardian, or other family member, whether residing within the family in the Section 8-assisted unit or not; or
         2. (ii) From other persons not residing in the unit; and

      3. (C)

         1. (i) Institutions of higher education, when the specific institution and scholarship amount are referenced.
         2. (ii)

9. (a) (a) An institution of higher learning:

   1. (1) (1) Provides education beyond high school (or equivalent);
   2. (2) (2) Is accredited (or has reaccreditation status);
   3. (3) (3) Is legally authorized to provide a program of education beyond the high school level; and
   4. (4) (4) Awards a bachelor's degree or provides a two-year program that is acceptable for full credit towards such a degree.

10. (b) (b) The institution may be public or nonprofit.

    1. (iii)

11. (a) (a) Institutions of higher education also includes any school that:

    1. (1) (1) Provides education beyond high school (or equivalent);
    2. (2) (2) Is accredited (or has reaccreditation status);
    3. (3) (3) Is legally authorized to provide a program of education beyond the high school level; and
    4. (4) (4) Provides not less than a one-year program of training to prepare students for gainful employment in a recognized occupation.

12. (b) (b) The institution may be public or nonprofit.

    1. (iv) Finally, an institution of higher learning includes public and nonprofit private educational institutions in any state that, in lieu of providing education beyond high school, admits students who are beyond the age of compulsory school attendance in the state in which the institution is located.

    2. (2) Financial assistance received from one (1) of the sources above, in excess of tuition, is not included in income if either of the two (2) following exceptions is applicable:

       1. (A) The student is over the age of twenty-three (23) with dependent children; or
       2. (B) The student is living with his or her parents who are applying for or receiving Section 8 assistance.
    3. (3) Financial assistance does not include loan proceeds for the purpose of determining income.

    4. (4)

       1. (A) Tuition includes whatever the school declares as tuition.
       2. (B) Do not add any amounts for books, fees, or other expenses that may be itemized separately on the verification form.

       3. (C) Note.

          1. (i) If you have a Section 8/I.R.C. § 42 combination on the property, the student must qualify under both programs to get the benefits of both programs.
          2. (ii) If family members are students and qualify for Section 8 but the entire household consists of full-time students and none of the I.R.C. § 42 exceptions apply, tax credits cannot be claimed on the affected units.

13. (g) Some common income exclusions are listed below. Please refer to the current Department of Housing and Urban Development Handbook 4350.3 for a comprehensive list:

    1. (1) Income from the employment of children (including foster children) under the age of eighteen (18);

    2. (2)

       1. (A) Payments received for the care of foster children or foster adults.

       2. (B) Foster adults are usually adults with disabilities who are:

          1. (i) Unrelated to the tenant family; and
          2. (ii) Unable to live alone;
    3. (3) Income of live-in care attendants;
    4. (4) Meals on Wheels or other programs that provide food for the needy;
    5. (5) Groceries provided by persons not living in the household;
    6. (6) The principal portion of the payments received on mortgages or deeds of trust;
    7. (7) The special pay to a family member serving in the United States Armed Forces who is exposed to hostile fire;
    8. (8) Temporary, nonrecurring, or sporadic income;
    9. (9) Annual rent credits or rebates paid to senior citizens by government agencies;
    10. (10) Lump sum additions to family assets, such as inheritances, insurance payments (including payments under health and accident insurance and workers’ compensation), capital gains, and settlement for personal or property losses (other than payments in lieu of earnings, such as unemployment and disability compensation);
    11. (11) Amounts received by the family that are specifically for, or in reimbursement of, the cost of medical expenses for any family member;

    12. (12)

        1. (A) Income from training programs.
        2. (B) Compensation from state or local employment training programs or training of a family member as resident management staff is not included in income.
        3. (C) Income from training programs not affiliated with a local government and income from the training of a family member resident to serve on the management staff are also excluded.

        4. (D) Amounts excluded by this provision:

           1. (i) Must be received under employment training programs with clearly defined goals and objectives; and
           2. (ii) Are excluded only for a limited period as determined in advance under the program by the state or local government;

    13. (13)

        1. (A) Amounts received under training programs funded by the Department of Housing and Urban Development are not included in income.

        2. (B)

           1. (i) Similarly, payments received under programs funded in whole or in part under the Workforce Investment Act [repealed] (formerly the Job Training Partnership Act [repealed]) are excluded from income.
           2. (ii) These are:
14. (a) (a) Employment and training programs for Native Americans and migrant and seasonal farm workers;

15. (b) (b) Job Corps;

    1. (c) (c) Veterans employment programs;

       1. (d) (d) State job training programs;
16. (e) (e) Career intern programs; and

17. (f) (f) Americorps; and

    1. (14) 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 aside for use under a Plan to Attain Self-Support are excluded from income.

Codification Notes: "LIHTC" means low-income housing tax credit. Section 8 of the Housing Act of 1937 is codified at 42 U.S.C. § 1437f. Title II of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 is codified at 42 U.S.C. § 4621 et seq. The Higher Education Act of 1965 is codified generally at 20 U.S.C. § 1001 et seq.