12 Common Items You Shouldn’t Include in Household Income

October 11, 2013

When certifying and recertifying households, you may come across certain items that look like income, but that HUD doesn’t consider income. It’s important to recognize these items and not mistakenly count them in a household member’s annual income. Otherwise, you’ll improperly inflate the household’s annual income, which could cause you to find an eligible household ineligible.

When certifying and recertifying households, you may come across certain items that look like income, but that HUD doesn’t consider income. It’s important to recognize these items and not mistakenly count them in a household member’s annual income. Otherwise, you’ll improperly inflate the household’s annual income, which could cause you to find an eligible household ineligible.

This is unfair to the household. You’re also at risk of losing points in your management and occupancy review. Plus, you’ll waste valuable time verifying items you shouldn’t have counted as income. We’ll tell you about 12 items that may seem like income but aren’t. And we’ll tell you the proper way to treat these items when certifying or recertifying households.

Item #1: Most One-Time Lump-Sum Payments

A household member will sometimes get a one-time lump-sum payment. For example, the household member might get an inheritance or capital gains, win the lottery, sell a piece of property, or get an insurance settlement. Generally, if a household member gets a one-time lump-sum payment, you shouldn’t consider it income [HUD Handbook 4350.3, pars. 5-6(Q)(1); 5-7(G)(3)(a); and Exhibit 5-1, Income Exclusions (3)].

But there are some exceptions. For example, if a household member received a lump-sum payment for freelance work he did, the payment would be considered income. If you’re not sure about a one-time lump-sum payment, check Exhibit 5-1 of the Handbook.

Also, even if the lump-sum payment isn’t income, the household member may put the lump-sum payment into a checking or savings account, money market account, certificate of deposit (CD), stocks, or some other type of asset. Then, include the asset’s income in the household member’s annual income. To do this, include either:

  • The actual income the household member’s assets are expected to earn over the next recertification year (if the household member’s total assets are $5,000 or less); or
  • The actual income the household member’s assets are expected to earn over the next recertification year or the income that you impute to those assets for the next recertification year, whichever is more (if the household member’s total assets are greater than $5,000) [Handbook 4350.3, pars. 5-7(E-F)].

Item #2: Settlement Payment from Disputed Welfare or Unemployment Benefits

If a household member gets a payment to settle a dispute over a claim for welfare, unemployment, or similar benefits, don’t include the settlement payment in the household member’s annual income [Handbook 4350.3, par. 5-6(O)(4)]. This can be confusing because you should include in income any periodic payments of welfare, unemployment, or similar benefits the household member gets.

For example, after a long dispute about whether a resident was entitled to unemployment benefits, a resident gets a $5,000 settlement payment. In this case, you don’t include the $5,000 payment in the annual income for the next recertification year.

Item #3: Lump-Sum Payment of Delayed Social Security or SSI Benefits

Don’t include in a household member’s annual income any delayed periodic payments of Social Security or Supplemental Security Income (SSI) that are paid in a lump sum [Handbook 4350.3, par. 5-6(Q)(2) and Exhibit 5-1, Income Exclusions (13)].

This is an exception to HUD’s general rule that requires the inclusion of delayed periodic payments (such as those for welfare or unemployment) in a household member’s annual income [Handbook 4350.3, par. 5-6(Q)(2); Exhibit 5-1, Income Inclusions (4)]. It’s also different from a household member’s regular Social Security or SSI payments (that is, those that aren’t delayed and aren’t paid in a lump sum), which you must count in a household member’s annual income [Handbook 4350.3, Exhibit 5-1, Income Inclusions (4)].

Example: Jane Doe applied for and was approved for SSI benefits on May 1, 2013, but because of a processing error, she didn’t get her monthly payments for May 2013 through September 2013. In October 2013, Doe gets a check for her October payment and the missed payments. Don’t include Doe’s delayed SSI benefits (the May through September missed payments) in her annual income for the next recertification year. But do include payments from October onward.

Item #4: Resident Service Stipends of $200 or Less

You may pay some household members a modest amount to perform a service at the site on a part-time basis, such as hall monitoring, mowing the lawn, and so on. HUD calls this a “resident service stipend.” If the stipend is $200 or less per month, don’t include it in the household member’s annual income. But if the stipend is more than $200 per month, include it in the household member’s annual income [Handbook 4350.3, par. 5-6(N) and Exhibit 5-1, Income Exclusions (8)(d)].

Example: You pay a resident $100 a month to patrol the site’s halls. Don’t include the $100 monthly payment in the resident’s annual income for the next recertification year.

Item #5: Student Financial Assistance

If a household member gets student financial assistance (such as a grant, scholarship, educational entitlement, work-study program, or financial aid package), don’t treat it as income. That’s the rule regardless of whether the student financial assistance is paid to the household member or to the household member’s school [Handbook 4350.3, par. 5-6(E) and Exhibit 5-1, Income Exclusions (6)]. However, it should be noted that for residents with Section 8 assistance, financial assistance in excess of tuition is counted as income unless the student is over age 23 with dependent children, or the student is treated as a dependent of the household.

Example: A school tells you that a resident will be getting a $20,000 grant for the next recertification year, $8,000 of which the school calls a “housing portion.” Don’t count any of the $20,000 grant, including the housing portion, in the resident’s annual income.

Item #6: Occasional Withdrawals from Retirement Accounts

Don’t include an occasional withdrawal from a retirement savings account, such as an Individual Retirement Account (IRA) or 401(k), in a household member’s annual income [Handbook 4350.3, par. 5-6(L)(2)].

Example: A retired resident who doesn’t get periodic payments from her IRA, withdraws $700 from the IRA to fix her car one month. Don’t include this $700 withdrawal in her annual income next year.

Item #7: Retirement Account Balances of Members Not Receiving Periodic Payments

If the household member is not receiving periodic payments but has access to the balances in retirement accounts, this is treated as an asset [HUD Handbook 4350.3, par. 5-7 (G)(4)(b)]. So you would count periodic withdrawals or payments from a retirement account as income [Handbook 4350.3, par. 5-7(G)(4)(d)].

Item #8: Foster Care Payments

HUD doesn’t consider foster care payments to be income. So don’t include in a household member’s annual income payments that the household member gets for the care of a foster child or foster adult. This rule applies only to payments made for official foster care relationships with local welfare agencies [Handbook 4350.3, par. 5-6(A)(3)(g) and Exhibit 5-1, Income Exclusions (2)].

Example: A resident gets $300 each month from a local social services agency to help her care for her foster child. Don’t include this $300 monthly payment in the resident’s annual income for the next recertification year.

Item #9: Long-Term Care Insurance Payments Under $180/Day

If a household member is getting long-term care insurance payments, don’t count payments that are less than $180 a day in the household member’s annual income. But do count payments that exceed $180 per day, or $67,700 a year [Handbook 4350.3, par. 5-6(L)(3)].

Example: A resident suffered a debilitating injury and entered a nursing home/rehabilitation center. For the past four months, she has gotten long-term care insurance payments of $120 a day. She’s still considered a member of the household because the household chose to have her remain a member. Don’t include the $120 daily payment in the household’s annual income for the next recertification year.

Item #10: Value of Food from Certain Sources

Don’t include in a household member’s annual income the value of food that the household member gets from:

  • A Meals on Wheels program, food stamps, or other programs that provide food for the needy;
  • Groceries provided by individuals outside the household; and
  • Food or reduced prices for food provided under the School Lunch Act and the Child Nutrition Act of 1966, including lunches and food under the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) [Handbook 4350.3, par. 5-6(R)(2); Exhibit 5-1, Income Exclusions (16)(a)].

Item #11: Earned Income Tax Credit

The earned income tax credit reduces the amount of federal tax that a household member owes in federal taxes and can result in a refund check if the credit exceeds the income tax owed. If a household member gets an earned income tax credit, don’t include it in the member’s annual income [Handbook 4350.3, Exhibit 5-1, Income Exclusions 16(n)].

Example: A resident gets $202 from his employer as an earned income tax credit four times a year. Don’t include these payments in his annual income for the next recertification year.

Item #12: Job Training Income

Don’t include certain types of job training income in a household member’s annual income, such as HUD-funded training [Handbook 4350.3, par. 5-6(M)(1); Exhibit 5-1, Income Exclusions 8(a)] or site owner training approved by HUD [Handbook 4350.3, par. 5-6(M)(3)].

You would also exclude income from a training program affiliated with a state or local government agency that meets the following requirements:

  • The program has clearly defined goals;
  • The program lasts for a specific, limited time; and
  • The household member’s initial enrollment in the program is for a year or less [Handbook 4350.3, par. 5-6(M)(2); Exhibit 5-1, Income Exclusions (8)(e)];

For training programs that aren’t affiliated with a government agency, these programs also must meet the same requirements as training programs affiliated with a state or local government agency [Handbook 4350.3, par. 5-6(M)(2); Exhibit 5-1, Income Exclusions (8)(e)].

If a household member gets stipends, transportation, or child care payments or reimbursements as part of the training program, don’t include them in household income either [Handbook 4350.3, par. 5-6(M)(2)(c)].

Example: A resident participates in a training program run by a state agency that will teach him how to install drywall. The program is scheduled to last three months, and he’ll get $400 a week for participating in the program and will be reimbursed for his transportation to the program. The state agency has verified that the program meets HUD’s requirements for government-affiliated training programs. Don’t include either the $400 weekly payment or the travel reimbursements in the resident’s annual income for the next recertification year.

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