Fact Sheet
For HUD Assisted Residents

Office of Housing
January 2002

This Fact Sheet is a general guide to inform the Owner/Management Agents (OA) and HUD-assisted residents of the responsibilities and right regarding income disclosure and verification.

Why Determining Income and Rent Correctly is important

Department of Housing and Urban Development studies show that many resident families pay incorrect rent.
The main causes of this problem are:

• Under-reporting of income by resident families, and
  
• OAs not granting exclusions and deductions to which resident families are entitled.
  
  

OAs and residents all have a responsibility in ensuring that the correct rent is paid.

OAs' Responsibilities:

• Obtain accurate income information
  
• Verify resident income
  
• Ensure residents receive the exclusions and deductions to which they are entitled
  
• Accurately calculate Tenant Rent
  
• Provide tenants a copy of lease agreement and income and rent determinations recalculate rent when changes in the family composition are reported
  
• Recalculate rent when resident income decreases
  
• Recalculate rent when residents income increases by $40 or more per month (except for Section 202 elderly/handicapped properties)
  
• Recalculate rent every 90 days when resident claims minimum rent hardship exemption
  
• Provide information on OA policies upon request
  
• Notify residents of any changes in requirements or practices for reporting income or determining rent
  
  

Resident's Responsibilities:

• Provide accurate family composition information
  
• Report all income
  
• Keep copies of papers, forms, and receipts which document income and expenses
  
• Report changes in family composition and income occurring between annual recertifications
  
• Sign consent forms for income verification
  
• Follow lease requirements and house rules
  
  

Income Determinations

A family's anticipated gross income determines not only eligibility for assistance, but also determines the rent a family will pay and the subsidy required. The anticipated income, subject to exclusions and deductions the family will receive during the next twelve (12) months, is used to determine the family's rent.

What is Annual Income?

Gross Income

Income Exclusions = Annual Income

What is Adjusted Income?

Annual Income

Deductions = Adjusted Income

Determining Tenant Rent

Project-Based Section 8 Rent Formula:

The rent a family will pay is the highest of the following amounts:

• 30% of the family's monthly adjusted income
  
• 10% of the family's monthly income
  
• Welfare rent or welfare payment from agency to assist family in paying housing costs.
  
OR

• $25 Minimum Rent
  
  

Income and Assets

HUD assisted residents are required to report all income from all sources to the Owner or Agent (OA).
Exclusions to income and deductions are part of the tenant rent process.

When determining the amount of income from assets to be included in annual income, the actual income derived from the assets is in excess of $5,000, then the amount included in annual income is the higher of 2% of the total assets or the actual income derived from the assets.

Annual Income Includes:

• Full amount (before payroll deductions) of wages and salaries, overtime pay, commissions, fees, tips and bonuses and other compensation for personal services
  
• Net income from the operation of a business or profession
  
• Interest, dividends and other net income of any kind from real or personal property (See Assets Include/Assets Do Not Include below)
  
• Full amount of periodic amounts received from Social Security, annuities, insurance policies, retirement funds, pensions, disability or death benefits and other similar types of periodic receipts, including lump-sum amount or prospective monthly amounts for the delayed start of a periodic amount
  
• Payments in lieu of earnings, such as unemployment and disability compensation, worker's compensation and severance pay
  
• Welfare assistance
  
• Periodic and determinable allowances, such as alimony and child support payments and regular contributions or gifts received from organizations or from persons not residing in the dwelling
  
• All regular pay, special pay and allowances of a member of the Armed Forces (except for special pay for exposure to hostile fire)
  
  

Assets Include:

• Stocks, bonds, Treasury bills, certificates of deposit, money market accounts
  
• Individual retirement and Keogh accounts
  
• Retirement and pension funds
  
• Cash held in savings and checking accounts, safe deposit boxes, homes, ect.
  
• Equity in rental property and other capital investments
  
• Personal property held as an investment
  
• Lump sum receipts or one-time receipts
  
• Mortgage or deed of trust held by an applicant
  
• Assets disposed of for less than fair market value.
  
  

Assets Do Not Include:

• Necessary personal property (clothing, furniture, cars, wedding ring, vehicles specially equipped for persons with disabilities)
  
• Interest in Indian trust land
  
• Term life insurance policies
  
• Equity in the cooperative unit in which the family lives
  
• Assets that are part of an active business
  
• Assets that are not effectively owned by the applicant
  
or are held in an individual's name but:

• The assets and any income they earn accrue to the benefit of someone else who is not a member of the household, and
  
• that other person is responsible for income taxes incurred on income generated by the assets
  
• Assets that are not accessible to the applicant and provide no income to the applicant (Example: A battered spouse owns a house with her husband. Due to the domestic situation, she receives no income from the asset and cannot convert the asset to cash.)
  
• Assets disposed of for less than fair market value as a result of:
  
• Foreclosure
  
• Bankruptcy
  
• Divorce or separation agreement if the applicant or resident receives important consideration not necessarily in dollars.
  
  

Exclusions from Annual Income:

• Income from the employment of children (including foster children) under the age of 18
  
• Payment received for the care of foster children or foster adults (usually persons with disabilities, unrelated to the tenant family, who are unable to live alone
  
• Lump-sum additions to family assets, such as inheritances, insurance payments (including payments under health and accident insurance and worker's compensation), capital gains and settlement for personal or property losses
  
• Amounts received by the family that are specifically for, or in reimbursement of, the cost of medical expenses for any family member
  
• Income of a live-in aide
  
• The full amount of student financial assistance either paid directly to the student or to the educational institution
  
• The special pay to a family member serving in the Armed Forces who is exposed to hostile fire
  
• Amounts received under training programs funded by HUD
  
• 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 of Attain Self-Sufficiency (PASS)
  
• Amounts received by a participant in other publicly assisted programs which are specifically for or in reimbursement of out-of-pocket expenses incurred (special equipment, clothing, transportation, child care, etc.) and which are made solely to allow participation in a specific program
  
• Resident service stipend (not to exceed $200 per month)
  
• Incremental earnings and benefits resulting to any family member from participation in qualifying State or local employment training programs and training of a family member as resident management staff
  
• Temporary, non-recurring or sporadic income (including gifts)
  
• Reparation payments paid by a foreign government pursuant to claims filed under the laws of that government by persons who were persecuted during the Nazi era
  
• Earnings in excess of $480 for each full time student 18 years old or older (excluding head of household, co-head or spouse)
  
• Adoption assistance payments of supplemental security income and social security benefits that are received in a lump sum amount or in prospective monthly amounts
  
• Amounts received by the family in the form of refunds or rebates under State of local law for property taxes paid on the dwelling unit
  
• Amounts paid by a State agency to a family with a member who has a developmental disability and is living at home to offset the cost of services and equipment needed to keep the developmentally disabled family member at home
  
  

Federally Mandated Exclusions:

• Value of the allotment provided to an eligible household under the Food Stamp Act of 1977
  
• Payments to Volunteers under the Domestic Volunteer Services Act of 1973
  
• Payments received under the Alaska Native Claims Settlement Act
  
• Income derived from certain sub marginal land of the US that is held in trust for certain Indian Tribes
  
• Payments or allowances made under the Department of Health and Human Services' Low-Income Home Energy Assistance Program
  
• Payments received under programs funded in whole or in part under the Job Training Partnership Act
  
• Income derived from the disposition of funds to the Grand River Band of Ottawa Indians
  
• The first $2000 of per capita shares received from judgment funds awarded by the Indian Claims Commission or the US. Claims Court, the interests of individual Indians in trust or restricted Lands, including the first $2000 per year of income received by individual Indians from funds derived from interests held in such trust or restricted lands
  
• Amounts of scholarships funded under the Title IV of the Higher Education Act of 1965, including awards under the Federal work-study program or under the Bureau of Indian Affairs student assistance programs


• Payments received from programs funded under Title V of the Older Americans Act of 1985
  
• Payments received on or after January 1, 1989, from the Agent Orange Settlement Fund or any other fund established pursuant to the settlement in In Re Agent-product liability litigation
  
• Payments received under the Maine Indian Claims Settlement Act of 1980
  
• The value of any childcare provided or arranged (or any amount received as payment for such care or reimbursement for costs incurred for such care) under the Child Care and Development Block Grant Act of 1990
  
• Earned income tax credit (EITC) refund payments on or after January 1, 1991
  
• Payments by the Indian Claims Commission to the Confederated Tribes and Bands of Yakima Indian Nation or the Apache Tribe of Mescalero Reservation
  
• Allowance, earnings and payments to AmeriCorps participants under the National and Community Service Act of 1990
  
• Any allowance paid under the provisions of 38U.S.C. 1805 to a child suffering from spina bifida who is the child of a Vietnam veteran
  
• Any amount of crime victim compensation (under the Victims of Crime Act) received through crime victim assistance (or payment or reimbursement of the cost of such assistance) as determined under the Victims of Crime Act because of the commission of a crime against the applicant under the Victims of Crime Act
  
• Allowances, earnings and payments to individuals participating under the Workforce Investment Act of 1998
  
  

Deductions:

• $480 for each dependant including full time students or persons with a disability
  
• $400 for any elderly family or disabled family
  
• Unreimbursed medical expenses of any elderly family or disabled family that total more then 3% of Annual Income
  
• Unreimbursed reasonable attendant care and auxiliary apparatus expenses for disabled family member(s) to allow family member(s) to work that total more then 3% of Annual Income
  
• Any reasonable childcare expenses for children under age 13 necessary to enable a member of the family to be employed or to further his or her education
  
  

Reference Materials
Legislation:

• Quality Housing and Work Responsibility Act of 1998, Public Law 105-276, 112 Stat.2518 which amended the United States Housing Act of 1937, 42 USC 2437, et seq.
  
  

Regulations:

• General HUD Program Requirements;24 CFR Part 5
  
• Changes to Admission and Occupancy Requirements in the Public Housing and Section 8 Housing Assistance Programs; Final Rule, 65 FR 16692, March 29, 2000; 24 CFR 880 et al.
  
• Determining Adjusted Income in HUD Programs Serving Persons with Disabilities; Requiring Mandatory Deductions for Certain Expenses; and Disallowance for Earned Income, 65 FR 4608, August 21, 2000; 24 CFR parts 5, 92, et al.
  
  

Handbook:

• 4350,3 Occupancy Requirements of Subsidized Multifamily Housing Programs
  
  

Notices:

• "Federally Mandated Exclusions" Notice 66 FR 4669, April 20, 2001
  
• Notice H 00-18, Admission and Occupancy of the Quality Housing and Work Responsibility Act of 1998 (QHWRA) for Multifamily Housing Programs
  
  

For More Information:

Find out more about HUD's programs on HUD's Internet homepage at http://www.hud.gov


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