5-1 Introduction

• A. Owners must determine the amount of a family’s income before the family is allowed to move into assisted housing and at least annually thereafter. The amount of assistance paid on behalf of the family is calculated using the family’s annual income less allowable deductions. HUD program regulations specify the types and amounts of income and deductions to be included in the calculation of annual and adjusted income.

• B. Although the definitions of annual and adjusted income used for the programs covered in this handbook have some similarities with rules used by the U.S. Internal Revenue Service (IRS), the tax rules are different from the HUD program rules.

• C. The most frequent errors encountered in reviews of annual and adjusted income determinations in tenant files fall in three categories:

  1. Applicants and tenants failing to fully disclose income information;

  2. Errors in identifying required income exclusions; and

  3. Incorrect calculations of deductions, often the result of failure to obtain third-party verification.

Careful interviewing and thorough verification can minimize the occurrence of these errors.

• D.

• Chapter 5 is organized as follows:

• Section 1: Determining Annual Income discusses the requirements regarding annual income and the procedure for calculating a family’s annual income when determining eligibility. This section also includes guidance on determining income from assets.

• Section 2: Determining Adjusted Income describes the procedures and requirements for determining adjusted income based on allowable deductions.

• Section 3: Verification presents the requirements for verifying information provided by applicants and tenants related to their eligibility.

• Section 4: Calculating Tenant Rent discusses the methods for calculating the tenant’s portion of rent under the different programs covered by this handbook.

HUD Occupancy Handbook Chapter 5: Determining Income & Calculating Rent

6/07

5-1

4350.3 REV-1