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Three Definitions of Income
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Calculating Income Eligibility Contents
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Since the HOME Final Rule went into effect October 16, 1996, the
HOME Program has given PJs and their partners the flexibility to
choose among the following three definitions of "annual
income" when calculating income and allowances for HOME-assisted
activities.
- Annual income as defined in 24 CFR 5.609, referred to as "Part
5 annual income";
- Annual income as reported under the Census
Long Form for the most recent decennial census; and
- "Adjusted gross income" as defined for reporting purposes
under the IRS
Form 1040 long form (not IRS Forms 1040A or 1040EZ).
Click here to learn about the major
differences between the three definitions of "annual income."
This change in the HOME regulations is consistent with a similar
change to the CDBG
regulations which went into effect December 11, 1995. The change
in the HOME regulations was intended to ease administration for
PJs when projects are funded by multiple sources, including CDBG.
PJs may use more than one definition of annual income within their
HOME Program in its entirety. However, PJs must also ensure that
applicants to their HOME-funded programs and activities are treated
equitably. For this reason, the same definition of income must be
used for all applicants within a particular program or activity.
For example, if a PJ decides to use the Part 5 definition of annual
income for its homebuyer program, it must use this definition for
all applicants to the homebuyer program. It may not use the Census
Long Form definition for one applicant and the Part 5 definition
for another applicant. However, the PJ may choose to use the Census
Long Form definition for all applicants to its owner-occupied rehabilitation
programs.
Defining Annual Income
The term "annual income" is used in the HOME Program
to refer to annual (gross) income, as calculated using one of the
three definitions allowed under the HOME Program.
While the IRS uses the term "adjusted gross income",
this amount is considered "annual income" for the purposes
of the HOME Program.
Under the HOME Program, the term "adjusted income" is
used only in reference to the process of subtracting certain deductions
from annual (gross) income to determine subsidy or payment levels
in accordance with 24 CFR 5.611.
See the Calculating
Adjusted Income topic of this module for guidance on "adjusted
income" under the HOME Program.
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