CHAPTER 5. DETERMININGINCOMEANDCALCULATINGRENT

5-1Introduction

A.Ownersmustdeterminetheamountofafamily’sincomebeforethefamilyisallowedtomoveintoassistedhousingandatleastannuallythereafter.Theamountofassistancepaidonbehalfofthefamilyiscalculatedusingthefamily’sannualincomelessallowabledeductions.HUDprogramregulationsspecifythetypesandamountsofincomeanddeductionstobeincludedinthecalculationofannualandadjustedincome.

B.AlthoughthedefinitionsofannualandadjustedincomeusedfortheprogramscoveredinthishandbookhavesomesimilaritieswithrulesusedbytheU.S.InternalRevenueService(IRS),thetaxrulesaredifferentfromtheHUDprogramrules.

C.Themostfrequenterrorsencounteredinreviewsofannualandadjustedincomedeterminationsintenantfilesfallinthreecategories:

1.Applicantsandtenantsfailingtofullydiscloseincomeinformation;

2.Errorsinidentifyingrequiredincomeexclusions;and

3.Incorrectcalculationsofdeductionsoftenresultingfromfailuretoobtainthird-partyverification.

Carefulinterviewingandthoroughverificationcanminimizetheoccurrenceoftheseerrors.

D.Chapter5isorganizedasfollows:

  • Section1:DeterminingAnnualIncomediscussestherequirementsregardingannualincomeandtheprocedureforcalculatingafamily’sannualincomewhendeterminingeligibility.Thissectionalsoincludesguidanceondeterminingincomefromassets.
  • Section2:DeterminingAdjustedIncomedescribestheproceduresandrequirementsfordeterminingadjustedincomebasedonallowabledeductions.
  • Section3:Verificationpresentstherequirementsforverifyinginformationprovidedbyapplicantsandtenantsrelatedtotheireligibility.
  • Section4:CalculatingTenantRentdiscussesthemethodsforcalculatingthetenant’sportionofrentunderthedifferentprogramscoveredbythishandbook.

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5-2KeyTerms

A.Thereareanumberoftechnicaltermsusedinthischapterthathaveveryspecificdefinitionsestablishedbyfederalstatuteorregulations,orbyHUD.ThesetermsarelistedinFigure5-1andtheirdefinitionscanbefoundintheGlossarytothishandbook.Itisimportanttobefamiliarwiththesedefinitionswhenreadingthischapter.

B.Theterms“disability”and“personswithdisabilities”areusedintwocontexts–forcivilrightsprotections,andforprogrameligibilitypurposes.Eachusehasspecificdefinitions.

1.Whenusedincontextofprotectionfromdiscriminationorimprovingtheaccessibilityofhousing,thecivilrights-relateddefinitionsapply.

2.Whenusedinthecontextofeligibilityundermultifamilysubsidizedhousingprograms,theprogrameligibilitydefinitionsapply.

NOTE:SeetheGlossaryforspecificdefinitionsandparagraph2-23foranexplanationofthisdifference.

Figure5-1:KeyTerms

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Section1:DeterminingAnnualIncome

5-3KeyRegulations

ThisparagraphidentifiesthekeyregulatorycitationpertainingtoSection1:DeterminingAnnualIncome.Thecitationanditstitlearelistedbelow.

  • 24CFR5.609AnnualIncome

5-4Key Requirements

A.Annualincomeistheamountofincomethatisusedtodetermineafamily’seligibilityforassistance.Annualincomeisdefinedasfollows:

1.Allamounts,monetaryornot,thatgotoorarereceivedonbehalfofthefamilyhead,spouseorco-head(evenifthefamilymemberistemporarilyabsent),oranyotherfamilymember;or

2.Allamountsanticipatedtobereceivedfromasourceoutsidethefamilyduringthe12-monthperiodfollowingadmissionorannualrecertificationeffectivedate.

B.Annualincomeincludesallamountsthatarenotspecificallyexcludedbyregulation.Exhibit5-1,IncomeInclusionsandExclusions,providesthecompletelistofincomeinclusionsandexclusionspublishedintheregulationsandFederalRegisternotices.

C.Annualincomeincludesamountsderived(duringthe12-monthperiod)fromassetstowhichanymemberofthefamilyhasaccess.

5-5MethodsforProjectingandCalculatingAnnualIncome

A.Therequirementsfordeterminingwhetherafamilyiseligibleforassistance,andtheamountofrentthefamilywillpay,requiretheownertoprojectorestimatetheannualincomethatthefamilyexpectstoreceive.Thereareseveralwaystomakethisprojection.Thefollowingaretwoacceptablemethodsforcalculatingtheannualincomeanticipatedforthecomingyear:

1.Generallytheownermustusecurrentcircumstancestoanticipateincome.Theownercalculatesprojectedannualincomebyannualizingcurrentincome.Incomethatmaynotlastforafull12months(e.g.,unemploymentcompensation)shouldbecalculatedassumingcurrentcircumstanceswilllastafull12months.Ifchangesoccurlaterintheyear,aninterimrecertificationcanbeconductedtochangethefamily’srent.

2.Ifinformationisavailableonchangesexpectedtooccurduringtheyear,usethatinformationtodeterminethetotalanticipatedincomefromallknownsourcesduringtheyear**.Forexample,ifaverificationsourcereportsthataunioncontractcallsfora2%payincreasemidwaythrough

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theyear,theownermayaddthetotalincomeforthemonthsbefore,andthetotalforthemonthsaftertheincrease**.

B.Onceallsourcesofincomeareknownandverified,ownersmustconvertreportedincometoanannualfigure.Convertperiodicwagestoannualincomebymultiplying:

1.Hourlywagesbythenumberofhoursworkedperyear(2,080hoursforfull-timeemploymentwitha40-hourweekandnoovertime);

2.Weeklywagesby52;

3.Bi-weeklywages(paideveryotherweek)by26;

4.Semi-monthlywages(paidtwiceeachmonth)by24;and

5.Monthlywagesby12.

Toannualizeotherthanfull-timeincome,multiplythewagesbytheactualnumberofhoursorweeksthepersonisexpectedtowork.

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Annual Income is calculated as follows:
240 hours x$7.50= / $1,800
$1,840 hoursx $8.00 = / $14,720
Annual Income

C.Somecircumstancespresentmorethantheusualchallengestoestimatinganticipatedincome.Examplesofchallengingsituationsincludeafamilythathassporadicworkorseasonalincomeoratenantwhoisself-employed.Inallinstances,ownersareexpectedtomakeareasonablejudgmentastothemostreliableapproachtoestimatingwhatthetenantwillreceiveduringtheyear.Inmanyofthesechallengingsituations,midyearorinterimrecertificationsmayberequiredtoreflectchangingcircumstances.Someexamplesofapproachestomorecomplexsituationsareprovidedbelow.

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5-6CalculatingIncome—ElementsofAnnualIncome

A.IncomeofAdultsandDependents

1.Figure5-2summarizeswhoseincomeiscounted.

2.Adults.Counttheannualincomeofthehead,spouseorco-head,andotheradultmembersofthefamily.Inaddition,personsundertheageof18whohaveenteredintoaleaseunderstatelawaretreatedasadults,andtheirannualincomemustalsobecounted.Thesepersonswillbeeitherthehead,spouse,orco-head;theyaresometimesreferredtoasemancipatedminors.

NOTE:Ifanemancipatedminorisresidingwithafamilyasamemberotherthanthehead,spouse,orco-head,theindividualwouldbeconsideredadependentandhisorherincomehandledinaccordancewithsubparagraph3below.

3.Dependents.Adependentisafamilymemberwhoisunder18yearsofage,isdisabled,orisafull-timestudent

Theheadofthefamily,spouse,co-head,fosterchild,orlive-inaideareneverdependents.Someincomereceivedonbehalfoffamilydependentsiscountedandsomeisnot.

a.Earnedincomeofminors(familymembersunder18)isnotcounted.

b.Benefitsorotherunearnedincomeofminorsiscounted.

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Figure5-2:WhoseIncomeisCounted?

c.Whenmorethanonefamilysharescustodyofachildandbothfamiliesliveinassistedhousing,onlyonefamilyatatimecanclaimthedependentdeduction.Thefamilythatcountsthedependentdeductionalsocountstheunearnedincomeofthechild.Theotherfamilyclaimsneitherthedependentdeductionnortheunearnedincomeofthechild.

d.Whenfull-timestudentswhoare18yearsofageorolderaredependents,asmallamountoftheirearnedincomewillbecounted.Countonlyearnedincomeuptoamaximumof$480peryearforfull-timestudents,age18orolder,whoarenottheheadofthefamilyorspouseorco-head.Iftheincomeislessthan$480annually,countalltheincome.Iftheannualincomeexceeds

$480,count$480andexcludetheamountthatexceeds$480.

e.Theincomeoffull-timestudents18yearsofageorolderwhoaremembersofthehouseholdbutawayatschooliscountedthesameastheincomeforotherfull-timestudents.Theincomeofminorswhoaremembersofthehouseholdbutawayatschooliscountedastheincomeforotherminors.

f.Allincomeofafull-timestudent,18yearsofageorolder,iscountedifthatpersonistheheadofthefamily,spouse,orco-head.

g.Paymentsreceivedbythefamilyforthecareoffosterchildrenorfosteradultsarenotcounted.Thisruleappliesonlytopayments

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Section1:DeterminingAnnual Income

madethroughtheofficialfostercarerelationshipswithlocalwelfareagencies.

h.Adoptionassistancepaymentsinexcessof$480arenotcounted.

B.IncomeofTemporarilyAbsentFamilyMembers

1.Ownersmustcountallincomeoffamilymembersapprovedtoresideintheunit,evenifsomemembersaretemporarilyabsent.

2.Iftheownerdeterminesthatanabsentpersonisnolongerafamilymember,theindividualmustberemovedfromtheleaseandtheHUD-50059.

3.Atemporarilyabsentindividualonactivemilitarydutymustberemovedfromthefamily,andhisorherincomemustnotbecountedunlessthatpersonistheheadofthefamily,spouse,orco-head.

a.However,ifthespouseoradependentofthepersononactivemilitarydutyresidesintheunit,thatperson’sincomemustbecountedinfull,evenifthemilitarymemberisnotthehead,orspouseoftheheadofthefamily.

b.Theincomeofthehead,spouse,orco-headwillbecountedevenifthatpersonistemporarilyabsentforactivemilitaryduty.

C.*DeploymentofMilitaryPersonneltoActiveDuty

OwnersareencouragedtobeaslenientasresponsiblypossibletosupportaffectedhouseholdsinsituationwherepersonsarecalledtoactivedutyintheArmedForces.Specificactionsthatownersshouldundertaketosupportmilitaryhouseholdsinclude,butarenotlimitedto:*

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1.*Allowaguardiantomoveintotheassistedunitonatemporarybasistoprovidecareforanydependentsthemilitarypersonleavesintheunit.Incomeoftheguardiantemporarilylivingintheunitforthispurposeisnotcountedasincome.

2.AllowatenantlivinginanassistedunittoprovidecareforanydependentsofpersonscalledtoactivedutyintheArmedForcesonatemporarybasis,aslongastheheadand/orco-headofhouseholdcontinuestoserveinactiveduty.Incomeofthechild(e.g.,SSIbenefits,militarybenefits)isnotcountedasincomeofthepersonprovidingthecare.

3.ExcludefromannualincomespecialpayreceivedbyahouseholdmemberservingintheArmedServiceswhoisexposedtohostilefire(seeExhibit5-1).

4.Giveconsiderationforanycaseinvolvingdelayedpaymentoftenantrent.Determinewhetheritisappropriatetoacceptalatepayment.

5.Allowtheassistancepaymentandtheleasetoremainineffectforareasonableperiodoftime(dependingonthelengthofdeployment)beyondthatrequiredbytheSoldiers’andSailors’CivilReliefActof1940,50U.S.C.§§501-591,eventhoughtheadultmembersofthemilitaryfamilyaretemporarilyabsentfromtheassistedunit.*

D.IncomeofPermanentlyConfinedFamilyMembers

1.Anindividualpermanentlyconfinedtoanursinghomeorhospitalmaynotbenamedasfamilyhead,spouse,orco-headbutmaycontinueasafamilymemberatthefamily’sdiscretion.Thefamily’sdecisiononwhetherornottoincludethepermanentlyconfinedfamilymemberasafamilymemberdeterminesifthatperson’sincomewillbecounted.

a.Includetheindividualasafamilymemberandtheincomeandallowabledeductionsrelatedtothemedicalcareofthepermanentlyconfinedindividualarecounted;or

b.Excludetheindividualasafamilymemberandtheincomeandallowancesbasedonthemedicalcareofthepermanentlyconfinedindividualarenotcounted.

2.Ifthefamilyelectstoincludethepermanentlyconfinedmember,theindividualislistedontheHUD-50059asanadultwhoisnotthehead,spouse,orco-head,evenwhenthepermanentlyconfinedfamilymemberismarriedtothepersonwhoisorwillbecometheheadofthefamily.TheownershouldconsiderextenuatingcircumstancesthatmaypreventtheconfinedmemberfrombeingabletosigntheHUD-50059.Ifthe

ownerdeterminestheconfinedmemberisunabletosigntheHUD-50059,

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theownermustdocumentthefilewhythesignaturewasnotobtained.Ifthefamilyelectsnottoincludethepermanentlyconfinedmember,theindividualwouldnotbelistedontheHUD-50059.**

E.EducationalScholarshipsorGrants

Allformsofstudentfinancialassistance(grants,scholarships,educationalentitlements,workstudyprograms,andfinancialaidpackages)areexcludedfromannualincome**exceptforstudentsreceivingSection8assistance.**Thisistruewhethertheassistanceispaidtothestudentordirectlytotheeducationalinstitution

**ForstudentsreceivingSection8assistance,allfinancialassistanceastudentreceives(1)undertheHigherEducationActof1965,(2)fromprivatesources,or

(3)fromaninstitutionofhighereducationthatisinexcessofamountsreceivedfortuitionisincludedinannualincomeexceptifthestudentisovertheageof23withdependentchildrenorthestudentislivingwithhisorherparentswhoarereceivingSection8assistance.SeeParagraph3-13forfurtherinformationoneligibilityofstudentstoreceiveSection8assistanceandtheGlossaryforthedefinitionofStudentFinancialAssistance.**

F.AlimonyorChildSupport

Ownersmustcountalimonyorchildsupportamountsawardedbythecourtunlesstheapplicantcertifiesthatpaymentsarenotbeingmadeandthatheorshehastakenallreasonablelegalactionstocollectamountsdue,includingfilingwiththeappropriatecourtsoragenciesresponsibleforenforcingpayment.

1.Theownermayacceptprintoutsfromthecourtoragencyresponsibleforenforcingsupportpayments,orotherevidenceindicatingthefrequencyandamountofsupportpaymentsactuallyreceived.

2.Childsupportpaidtothecustodialparentthroughastatechildsupportenforcementorwelfareagencymaybeincludedinthefamily’smonthlywelfarecheckandmaybedesignatedindifferentways.Insomestatesthesepaymentsarenotidentifiedasseparatefromthewelfaregrant.Inthesestates,itisimportanttodeterminewhichportionischildsupportandnottocountittwice.Inotherstates,thepaymentmaybelistedaschildsupportoras“pass-through”payments.Theseamountsmustbecountedasannualincome.

3.Whennodocumentationofchildsupport,divorce,orseparationisavailable,eitherbecausetherewasnomarriageorforanotherreason,theownermayrequirethefamilytosignacertificationstatingtheamountofchildsupportreceived.

G.RegularCashContributionsandGifts

1.Ownersmustcountasincomeanyregularcontributionsandgiftsfrompersonsnotlivingintheunit.Thesesourcesmayincluderentandutility

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Determining AnnualIncome

paymentspaidonbehalfofthefamily,andothercashornoncashcontributionsprovidedonaregularbasis.

2.Groceriesand/orcontributionspaiddirectlytothechildcareproviderbypersonsnotlivingintheunitareexcludedfromannualincome.

3.Temporary,nonrecurring,orsporadicincome(includinggifts)isnotcounted.

H.IncomefromaBusiness

Whencalculatingannualincome,ownersmustincludethenetincomefromoperationofabusinessorprofessionincludingself-employmentincome.Netincomeisgrossincomelessbusinessexpenses,interestonloans,anddepreciationcomputedonastraight-linebasis.

1.Inadditiontonetincome,ownersmustcountanysalariesorotheramountsdistributedtofamilymembersfromthebusiness,andcashorassetswithdrawnbyfamilymembers,exceptwhenthewithdrawalisareimbursementofcashorassetsinvestedinthebusiness.

2.Whencalculatingnetincome,ownersmustnotdeductprincipalpaymentsonloans,interestonloansforbusinessexpansionorcapitalimprovements,otherexpensesforbusinessexpansion,oroutlaysforcapitalimprovements.

3.Ifthenetincomefromabusinessisnegative,itmustbecountedaszeroincome.Anegativeamountmustnotbeusedtooffsetotherfamilyincome.

I.**PeriodicSocialSecurityPayments

Countthegrossamount,beforedeductionsforMedicare,etc.,ofperiodicSocialSecuritypayments.Includepaymentsreceivedbyadultsonbehalfofindividualsundertheageof18orbyindividualsundertheageof18fortheirownsupport.**

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J.AdjustmentsforPriorOverpaymentofBenefits

Ifanagencyisreducingafamily'sbenefitstoadjustforaprioroverpayment(e.g.,socialsecurity,SSI,TANF,orunemploymentbenefits),counttheamountthatisactuallyprovidedaftertheadjustment.

K.PublicAssistanceIncomeinAs-PaidLocalities

1.Specialcalculationsofpublicassistanceincomearerequiredfor“as-paid”state,county,orlocalpublicassistanceprograms.An“as-paid”systemisone:

a.Inwhichthefamilyreceivesanamountfromapublicagencyspecificallyforshelterandutilities;and

b.Inwhichtheamountisadjustedbasedupontheactualamountthefamilypaysforshelterandutilities.

2.Thepublicassistanceamountspecificallydesignatedforrentandutilitiesiscalledthe“welfarerent.”

3.Todetermineannualincomeforpublicassistancerecipientsin“as-paid”localities,includethefollowing:

a.Theamountofthefamily’sgrantforotherthanshelterandutilities;and

b.Themaximumamountthewelfaredepartmentcanpayforshelterandutilitiesforafamilyofthatsize(i.e.,thewelfarerent).Thismaybedifferentfromtheamountthefamilyisactuallyreceiving.

4.Eachas-paidlocalityworkssomewhatdifferently,andmanyaresubjectto court-orderedmodificationstothebasicpolicy.OwnersshoulddiscusshowtherulesareappliedwiththeHUDFieldOffice.

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L.PeriodicPaymentsfromLong-TermCareInsurance,Pensions,Annuities,andDisabilityorDeathBenefits

1.Thefullamountofperiodicpaymentsfromannuities,insurancepolicies,retirementfunds,pensions,anddisabilityordeathbenefitsisincludedinannualincome.(SeesubparagraphObelowforinformationonthewithdrawalofcashorassetsfromaninvestment.)PaymentssuchasBlackLungSickBenefits,VeteransDisability,andDependentIndemnityCompensationfortheWidowofaKilledinActionServicemanareexamplesofsuchperiodicpayments.

2.WithdrawalsfromretirementsavingsaccountssuchasIndividualRetirementAccountsand401Kaccountsthatarenotperiodicpaymentsdonotfallinthiscategoryandarenotcountedinannualincome(seeparagraph5.7G.4).

3.Ifthetenantisreceivinglong-termcareinsurancepayments,anypaymentsinexcessof$180perdaymustbecountedtowardthegrossannualincome.(NOTE:Paymentoflong-termcareinsurancepremiumsareaneligiblemedicalexpense–seeparagraph5-10D.8.k.)

4.*FederalGovernment/UniformedServicespensionfundspaidtoaformerspouse.*

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*FederalGovernment/UniformedServicespensionfundspaiddirectlyto*anapplicant’s/tenant’sformerspousepursuanttothetermsofacourtdecreeofdivorce,annulment,orlegalseparationarenotcountedasannualincome.Thestatecourthas,inthesettlementoftheparties’maritalassets,determinedtheextenttowhicheachpartysharesintheownershipofthepension.Thatportionofthepensionthatisorderedbythecourt(andauthorizedbytheOfficeofPersonnelManagement(OPM),tobepaidtotheapplicant’s/tenant’sformerspouseisnolongeranassetoftheapplicant/tenantandthereforeisnotcountedasincome.However,anypensionfundsauthorizedbyOPM,pursuanttoacourtorder,tobepaidtotheformerspouseofaFederalgovernmentemployeeiscountedasincomeforatenant/applicantreceivingsuchfunds.

TheOPMisresponsibleforhandlingcourtorders(anyjudgmentsorpropertysettlementsissuedbyorapprovedbyanycourtofanystate,the

DistrictofColumbia,theCommonwealthofPuertoRico,Guam,TheNorthernMarianaIslands,ortheVirginIslandsinconnectionwiththedivorce,annulmentofmarriage,orlegalseparationofaFederalgovernmentemployeeorretiree)affectingcurrentandretiredFederalgovernmentemployees.See5C.F.R.§838.103.OPMmustcomplywithcourtorders,decrees,orcourt-approvedpropertysettlementagreementsinconnectionwithdivorces,annulmentsofmarriage,orlegalseparationsofemployeesthatawardaportionoftheformerFederalgovernmentemployee’sretirementbenefits.Id.at§838.101(a)(1).Statecourtsorderingajudgmentorpropertysettlementinconnectionwithdivorce,annulmentofmarriage,orlegalseparationhavetheresponsibility ofissuingclear,specific,andexpressinstructionstoOPMwith regardstoprovidingbenefitstoformerspouses.Id.at§838.122.Inresponsetoinstructionsfromstatecourts,OPMwillauthorizepaymentstotheformerspouses.Id.at§838.121.Oncethepaymentshavebeen

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authorizedbyOPM,thereducedpensionamountpaidtotheretiredFederalemployee(thetenant/applicant)willbereflectedinthetenant’s/applicant’sstatementfromOPM.FormerspousesofFederalgovernmentemployeesreceivingcourtorderedpensionbenefitsareprovidedaForm-1099reflectingpensionbenefitsreceivedfromtheretiredFederalgovernmentemployee.Inverifyingtheincomeoftenants/applicants,ownersshouldrequirethattenants/applicantsprovideanycopiesofstatementsfromOPMverifyingpensionbenefits(includinganyreductionspursuanttoacourtorder,decreeorcourt-approvedpropertysettlementagreement),andanyevidenceofsurvivorbenefits,pensionsorannuitiesreceivedfromretiredFederalgovernmentemployeesincluding,butnotlimitedto,aForm-1099.(SeeParagraph5-

7.G.5formoreinformationonthetreatmentofincomefromFederalgovernmentpensions.)

5.*OtherState,localgovernment,socialsecurityorprivatepensionspaidtoaformerspouse.

Otherstate,localgovernment,socialsecurityorprivatepensionfundspaiddirectlytoanapplicant’s/tenant’sformerspousepursuanttothetermsofacourtdecreeofdivorce,annulment,orlegalseparationarealsonotcountedasannualincomeandshouldbehandledinthesamemanneras4,above.Thedecreeandcopiesofstatementsshouldbeobtainedinordertoverifythenetamountofthepensionthatshouldbeappliedinordertodetermineeligibilityandcalculaterent.*

M.IncomefromTrainingPrograms

1.AmountsreceivedunderHUD-fundedtrainingprogramsareexcludedfromannualincome.

2.Incrementalearningsandbenefitsreceivedbyanyfamilymemberduetoparticipationinqualifyingstateorlocalemploymenttrainingprogramsareexcluded.Incomefromtrainingprogramsnotaffiliatedwithalocalgovernment,andincomefromthetrainingofafamilymemberresidenttoserveonthemanagementstaff,isalsoexcluded.

a.Excludedincomemustbereceivedunderemploymenttrainingprogramswithclearlydefinedgoalsandobjectivesandforaspecific,limitedtimeperiod.Theinitialenrollmentmustnotexceedoneyear,althoughincomeearnedduringextensionsforadditionalspecifictimeperiodsmayalsobeeligibleforexclusion

b.Trainingincomemaybeexcludedonlyfortheperiodduringwhichthefamilymemberparticipatesintheemploymenttrainingprogram.

c.Exclusionsincludestipends,wages,transportationorchildcarepayments,orreimbursements.

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d.Incomereceivedascompensationforemploymentisexcludedonlyiftheemploymentisacomponentofajobtrainingprogram.Oncetrainingiscompleted,theemploymentincomebecomesincomethatiscounted.

e.Amountsreceivedduringthetrainingperiodfromsourcesthatareunrelatedtothejobtrainingprogram,suchaswelfarebenefits,socialsecuritypayments,orotheremployment,arenotexcluded.

2.OwnersmayasktouseprojectfundsorfundsfromtheResidualReceiptsaccounttounderwritealloraportionofthecostofdeveloping,maintaining,andmanagingajobtrainingprogramforprojectresidentsiffundsareavailable.

a.TheFieldOfficewillmakethedeterminationifthejobtrainingprogrammaybeapproved,andifprojectfundsaresufficienttofundthejobtrainingprogramandmaintainthephysicalandfinancialintegrityoftheproject.Jobtrainingprogramsmaybeeitheron-siteattheprojectoroff-site.Forexample,jobtrainingprogramsthathavepartnershipswithlocalcolleges,communitybasedorganizations,orlocalbusiness,mayhavein-housejobtrainingprogramsdesignedforprojectresidents.

b.FundsthatanownermaychoosetousetounderwriteajobtrainingprogrammayincludeSection8funds,CommunityDevelopmentBlockGrantfunds,orhousingauthorityfunds.Thesefundsmaybeusedtocoverthecostsofvariouscomponentsofajobtrainingprogram,includingcoursematerials,computersoftware,computerhardware,orpersonnelcosts.Also,contractorsandsubcontractors,inconnectionwithworkperformedunderaFlexibleSubsidycontract,mayelecttohireprojectresidentstoperformcertainskillsrequiredunderthecontract. Iftheemploymentoftheprojectresidentswaspursuantto anapprenticeshipprogram,thiscouldconstituteatrainingprogramusingHUDfunds,andincomereceivedbythetenantsintheapprenticeshipprogramwillqualifyasanexclusionfromincome.

N.ResidentServicesStipends

Residentservicesstipendsaregenerallymodestamountsofmoneyreceivedbyresidentsforperformingservicessuchashallmonitoring,firepatrol,lawnmaintenance,andresidentmanagement.

1.Iftheresidentstipendexceeds$200permonth,ownersmustincludetheentireamountinannualincome.

2.Iftheresidentstipendis$200orlesspermonth,ownersmustexcludetheresidentservicesstipendfromannualincome.

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O.IncomeReceivedbyaResidentofanIntermediateCareFacilityfortheMentallyRetardedorfortheDevelopmentallyDisabled(ICF/MRorICF/DD)andAssistedLivingUnitsinElderlyProjects

1.Anintermediatecarefacilityisagrouphomeformentallyretardedordevelopmentallydisabledindividuals(ICF/MRorICF/DD).Theterm“intermediatecarefacility”isoneusedbystatementalhealthdepartmentsforgrouphomesservingtheseresidents.

2.Assistedlivingunitsareunitsinprojectsdevelopedforelderlyresidentswithproject-basedassistancethathavebeenconvertedtoassistedlivingunits.

3.ThelocalagencyresponsibleforMedicaidprovidesfundsdirectlytogrouphomeoperatorsandassistedlivingprovidersforservices.

4.AnnualincomeatanICF/MR,ICF/DD,orassistedlivingunitmustinclude:

a.TheSSIpaymentatenantreceivesorthefacilityreceivesonbehalfofthetenant;plus

b.AllotherincomethetenantreceivesfromsourcesotherthanSSIthatarenotexcludedfromincomebyHUDregulations(seeExhibit5-1).Examplesofothersourcesofincomeincludewages,pensions,incomefromshelteredworkshops,incomefromatrust,orotherinterestincome.

c.ThepersonalallowanceofanindividualresidinginanICF/MRorICF/DDisnotincludedinannualincome.Iftheownerisunabletodeterminetheactualamountofthepersonalallowance,use$30.

5.AnnualincomedoesnotincludetheenhancedbenefitportionoftheSSIthatisprovidedtopayforservices.Insomeinstances,aresident’sSSIincomemaybereducedbetweenannualrecertificationsiftheresident’searningsexceedaspecifiedamount.Ifthishappens,theresidentmayrequestaninterimrecertification.

P.WithdrawalofCashorAssetsfromanInvestment

Thewithdrawalofcashorassetsfromaninvestmentreceivedasperiodicpaymentsshouldbecountedasincome.**Lumpsumreceiptsfrompensionandretirementfundsarecountedasassets.Ifbenefitsarereceivedthroughperiodicpayments,donotcountanyremainingamountsintheaccountasanasset.SeeParagraph5-7G.2forguidanceoncalculatingincomefromanasset.**

Q.LumpSumPaymentsCountedasIncome

1.Generally,lumpsumamountsreceivedbyafamily,suchasinheritances,insurancesettlements,orproceedsfromsaleofpropertyareconsideredassets,notincome.

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2.WhensocialsecurityorSSIbenefitincomeispaidinalumpsumasaresultofdeferredperiodicpayments,thatamountisexcludedfromannualincome.

3.Settlementpaymentsfromclaimdisputesoverwelfare,unemployment,orsimilarbenefitsmaybecountedasassets,butlumpsumpaymentscausedbydelaysinprocessingperiodicpaymentsforunemploymentorwelfareassistanceareincludedasincome.

Howlumpsumpaymentsfordelayedstartofbenefitsarecounteddependsuponthefollowing:

a.Whenthefamilyreportsthechange;

b.Whenaninterimre-examinationisconducted;and

c.Whetherthefamily’sincomeincreasesordecreasesasaresult.

AlumpsumpaymentresultingfromdelayedbenefitincomemaybetreatedineitherofthetwowaysillustratedintheexampleshowninFigure5-3.

4.Lotterywinningspaidinonepaymentaretreatedasassets.Lotterywinningspaidinperiodicpaymentsmustbecountedasincome.

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Figure5-3:TreatmentofDelayedBenefitPaymentsReceivedinaLumpSum

Family member loses his/her jobon October 19andapplies for unemployment benefits.Thefamilyreceivesa lump sum payment of$700in December tocoverthe period from 10/20 to12/5 and beginstoreceive $100 a week effective 12/6.
OptionA:The owner processes one interim re-examination immediately effective 11/1 and asecond interim after unemployment benefits areknown.
10/111/112/11/12/1
Monthly gross income800*0*0492**492**
Monthly allowances (three minors x 480/ 12120--120120
months)
Monthly adjusted income68000372372
Total tenant payment (TTP)204252525***112***
*The family’s income is calculated at $0/month beginning November 1, continuing until benefitsactually beginand new incomeiscalculated.TTP is set at the minimum rent.
**Family’s actual income for1/1is $100/week x52 weeks= $5,200 /12= $433.
However, because the family’s TTP was calculated at zero income for the months of NovemberandDecember (the period eventually covered bythe $700lump sum payment), the annual income to beused in calculating monthlygross income should be as follows:
$100/weekbenefit x52weeks= $5,200 + $700 lump sum payment =$5,900 annual gross income/12= $492.
***Increasedrent does notstartuntil2/1inorder to give the familynotice of rent increase.
Option B:The owner processes one interim re-examination after unemployment benefits are known.
10/111/112/11/12/1
Monthly gross income8000/800*0/800*433*433*Monthly allowances (three minors x 480/ 12 Months) 120 120 120 120 120
Monthly adjusted income6800/6800/680313313
Totaltenant payment204204*204*9494
RecalculatedTTP-94***94*9494
Rent credit (204 – 94=)-110110--
*Family’s actual income for11/1and 12/1is zero, but because the owner does not process aninterim re-examination, the family’s TTP continues tobe calculatedusing $800 as monthly grossincome.Beginning 1/1, monthly gross income isknown to be $100/week, or $433/month.
**The lumpsum payment is taken into account bymakingthe recertificationretroactive to 11/1.
Annual income is calculated as $5,200 /12= $433 monthly gross income.
***TTP for November and December recalculated as $433 monthly gross income and $313 monthlyadjusted incomex .30 = 94with credit or refundto family of $110/month for each of these twomonths for difference between TTPpaidof $204 andrecalculatedTTP of $94.

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R.ExclusionsfromIncome

1.Regulationsforthemultifamilysubsidizedhousingprogramscoveredbythishandbookspecificallyexcludecertaintypesofincomefromannualincome.However,manyoftheitemslistedasexclusionsfromannualincomeunderHUDrequirementsareitemsthattheIRSincludesastaxableincome.Therefore,itisimportantforownerstofocusspecificallyontheHUDprogramrequirementsregardingannualincome.

2.Amongtheitemsthatareexcludedfromannualincomearethevalueoffoodprovidedthrough:

a.TheMealsonWheelsprogram,foodstamps,orotherprogramsthatprovidefoodfortheneedy;

b.Groceriesprovidedbypersonsnotlivinginthehousehold;and

c.AmountsreceivedundertheSchoolLunchActandtheChildNutritionActof1966,includingreducedlunchesandfoodundertheSpecialSupplementalFoodProgramforWomen,InfantsandChildren(WIC).

3.Someadditionalexamplesofincomethatisexcludedfromthecalculationofannualincomefollow.

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5-7CalculatingIncomefromAssets

Annualincomeincludesamountsderivedfromassetstowhichfamilymembershaveaccess.

A.WhatisConsideredtoBeanAsset?

1.Assetsareitemsofvaluethatmaybeturnedintocash.Asavingsaccountisacashasset.Thebankpaysinterestontheasset.Theinterestistheincomefromthatasset.

2.Sometenantshaveassetsthatarenotearninginterest.Aquantityofmoneyunderamattressisanasset:itisathingofvaluethatcouldbeusedtothebenefitofthetenant,butunderthemattressitisnotproducingincome.

3.Somebelongingsofvaluearenotconsideredassets.Necessarypersonalpropertyisnotcountedasanasset.Exhibit5-2summarizestheitemsthatareconsideredassetsandthosethatarenot.

B.DeterminingIncomefromAssets

Note:ForfamiliesreceivingonlyBMIRassistance,itisnotnecessarytodeterminewhetherfamilyassetsexceed$5,000.TheruleforimputingincomefromassetsdoesnotapplytotheBMIRprogram.

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1.Thecalculationtodeterminetheamountofincomefromassetstoincludeinannualincomeconsidersbothofthefollowing:

a.Thetotalcashvalueofthefamily’sassets;and

b.Theamountofincomethoseassetsareearningorcouldearn.

2.Theruleforcalculatingincomefromassetsdiffersdependingonwhetherthetotalcashvalueoffamilyassetsis$5,000orless,orismorethan

$5,000.

C.DeterminingtheTotalCashValueofFamilyAssets

1.Tocomplywiththerulefordeterminingtheamountofincomefromassets,itisnecessarytofirstdeterminewhetherthetotal“cashvalue”offamilyassetsexceeds$5,000.

a.The“cashvalue”ofanassetisthemarketvaluelessreasonableexpensesthatwouldbeincurredinsellingorconvertingtheassettocash,suchasthefollowing:

(1)Penaltiesforprematurewithdrawal;

(2)Brokerandlegalfees;and

(3)Settlementcostsforrealestatetransactions.

Thecashvalueistheamountthefamilycouldactuallyreceiveincash,ifthefamilyconvertedanassettocash.

b.Itisessentialtonotethatafamilyisnotrequiredtoconvertanassettocash.Determiningthecashvalueoftheassetisdonesimplyasacalculationbytheownerbecauseitisarequiredstepwhendeterminingincomefromassetsunderprogramrequirements.

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D.AssetsOwnedJointly

1.Ifassetsareownedbymorethanoneperson,proratetheassetsaccordingtothepercentageofownership.Ifnopercentageisspecifiedorprovidedbyastateorlocallaw,proratetheassetsevenlyamongallowners.

2.Ifanassetisnoteffectivelyownedbyanindividual,donotcountitasanasset.Anassetisnoteffectivelyownedwhentheassetisheldinanindividual’sname,but(a)theassetandanyincomeitearnsaccruetothebenefitofsomeoneelsewhoisnotamemberofthefamily,and(b)thatotherpersonisresponsibleforincometaxesincurredonincomegeneratedbytheassets.

3.Determiningwhichindividualshaveownershipofanassetrequirescollectingasmuchinformationasisavailableandmakingthebestjudgmentpossiblebasedonthatinformation.

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Market Value / $100,000
Mortgage amount / -$60,000
40,000
Cost of disposing ofthe asset
(real estatecommission, and
other costs ofsale) / -$8,000
Cash Value / $32,000

a.Insomeinstances,butnotall,knowingwhosesocialsecuritynumberisconnectedwiththeassetmayhelpinidentifyingownership.Ownersshouldbeawarethattherearemanysituationsinwhichasocialsecuritynumberconnectedwithanassetdoesnotindicateownershipandothersituationswherethereisownershipwithoutconnectiontoasocialsecuritynumber.

b.Determiningwhohascontributedtoanassetorwhoispayingtaxesontheassetmayassistinidentifyingownership.

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E.CalculatingIncomefromAssetsWhenAssetsTotal$5,000orLess

Ifthetotalcashvalueofallthefamily’sassetsis$5,000orless,theactualincomethefamilyreceivesfromassetsistheamountthatisincludedinannualincomeasincomefromassets.

F.CalculatingIncomefromAssetsWhenAssetsExceed$5,000

1.Whennetfamilyassetsaremorethan$5,000,annualincomeincludesthegreaterofthefollowing:

a.Actualincomefromassets;or

b.ApercentageofthevalueoffamilyassetsbaseduponthecurrentpassbooksavingsrateasestablishedbyHUD.Thisiscalledimputedincomefromassets.Thepassbookrateiscurrentlysetat2%.

2.Tobeginthiscalculation,firstaddthecashvalueofallassets.Multiplythetotalcashvalueofallassetsby.02.Theproductisthe“imputedincome”fromassets.Then,addtheactualincomefromallassets.Thegreateroftheimputedincomefromassetsortheactualincomefromassetsisincludedinthecalculationofannualincome.

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Certificate of Deposit
$1,000
withdrawal fee $50interest @ 4% / $950 / $40
Savings Account
$500
interest @ 2.5% / $500 / $13
Stock
$300
Not paying dividends / $300 / $0
Total / $1,750 / $53

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Checking Account(non-interest bearing) / $455 / $0
Savings Account
(interest at 2.5%) / $6,000 / $150
Stocks(not payingdividends this year) / $3,000 / $0
Total / $9,455 / $150
Total cash value of assets isgreater / than$5,000. / Therefore, it is necessary to

G.CalculatingIncomefromAssets-SpecificTypesofAssets

1.Trusts.

a.Explanationoftrusts.

(1)Atrustisalegalarrangementgenerallyregulatedbystatelawinwhichoneparty(thecreatororgrantor)transferspropertytoasecondparty(thetrustee)whoholdsthepropertyforthebenefitofoneormorethirdparties(thebeneficiaries).Atrustcancontaincashorotherliquidassetsorrealorpersonalpropertythatcouldbeturnedintocash.Generally,theassetsareinvestedforthebenefitofthebeneficiaries.

(2)Trustsmayberevocableornonrevocable.Arevocabletrustisatrustthatthecreatorofthetrustmayamendorend(revoke).Whenthereisarevocabletrust,thecreatorhasaccesstothefundsinthetrustaccount.Whenthecreatorsetsupanonrevocabletrust,thecreatorhasnoaccesstothefundsintheaccount.

(3)Thebeneficiaryfrequentlywillbeunabletotouchanyofthetrustfundsuntilaspecifieddateorevent(e.g.,the

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beneficiary’s21stbirthdayorthegrantor’sdeath).Insomeinstances,thebeneficiarymayreceivetheregularinvestmentincomefromthetrustbutnotbeabletowithdrawanyoftheprincipal.

(4)Thebeneficiaryandthegrantormaybemembersofthesamefamily.Aparentorgrandparentmayhaveplacedfundsintrusttoachild.Ifthetrustisrevocable,thefundsmaybeaccessibletotheparentorgrandparentbutnottothechild.

b.Howtotreattrusts.

(1)Thebasisfordetermininghowtotreattrustsreliesoninformationaboutwhohasaccesstoeithertheprincipalintheaccountortheincomefromtheaccount.

(2)Revocabletrusts.Ifanymemberofthetenantfamilyhastherighttowithdrawthefundsintheaccount,thetrustisconsideredtobeanassetandistreatedasanyotherasset.Thecashvalueofthetrust(theamountthefamilymemberwouldreceiveifheorshewithdrewallthatcouldbewithdrawn)isaddedtototalnetassets.Theactualincomereceivedisaddedtoactualincomefromassets.

(3)Nonrevocabletrusts.Ifnofamilymemberhasaccesstoeithertheprincipalorincomeofthetrustatthecurrenttime,thetrustisnotincludedinthecalculationofincomefromassetsorinannualincome.

Ifonlytheincome(andnoneoftheprincipal)fromthetrustiscurrentlyavailabletoafamilymember,theincomeiscountedinannualincome,butthetrustisnotincludedinthecalculationofincomefromassets.

(4)Nonrevocabletrustasanassetdisposedofforlessthanfairmarketvalue.Ifatenantsetsupanonrevocabletrustforthebenefitofanotherpersonwhileresidinginassisted

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housing,thetrustisconsideredanassetdisposedofforlessthanfairmarketvalue(seesubparagraphG.6below).

Ifthetrusthasbeensetupsoincomefromthetrustisregularlyreinvestedinthetrustandisnotpaidbacktothecreator,thetrustiscalculatedasanyotherassetdisposedofforlessthanfairmarketvaluefortwoyearsandnottakenintoconsiderationthereafter.

Nonrevocabletrustdistributingincome.Whenatenantplacesanassetinanonrevocabletrustbutcontinuestoreceiveincomefromthetrust,theincomeisaddedtoannualincomeandthetrustiscountedasanassetdisposedofforlessthanmarketvaluefortwoyears.Followingthetwo-yearperiod,theownerwillcountonlytheactualincomedistributedfromthetrusttothetenant.

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(5)Paymentofprincipalfromatrust.Thebeneficiaryofatrustmayreceivefundsfromthetrustindifferentways.Abeneficiarymayreceivethefullvalueofatrustatonetime.Inthatinstancethefundswouldbeconsideredalumpsumreceiptandwouldbetreatedasanasset.Atrustsetuptoprovidesupportforapersonwithdisabilitiesmaypayonlyincomefromthetrustonaperiodicbasis.Occasionally,however,abeneficiarymaybegivenaportionofthetrustprincipalonaperiodicbasis.Whentheprincipalispaidoutonaperiodicbasis,thosepaymentsareconsideredregularincomeorgiftsandarecountedinannualincome.

c.Specialneedstrusts.

Aspecialneedstrustisatrustthatmaybecreatedundersomestatelaws,oftenbyfamilymembersfordisabledpersonswhoarenotabletomakefinancialdecisionsforthemselves.Generally,theassetswithinthetrustarenotaccessibletothebeneficiary.

(1)Ifthebeneficiarydoesnothaveaccesstoincomefromthetrust,thenitisnotcountedaspartofincome.

(2)Ifincomefromthetrustispaidtothebeneficiaryregularly,thosepaymentsarecountedasincome.

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2.Annuities.

a.Annuityfactsandterms.

(1)Anannuityisacontractsoldbyaninsurancecompanydesignedtoprovidepayments,usuallytoaretiredperson,atspecifiedintervals.Fixedannuitiesguaranteeacertainpaymentamount,whilevariableannuitiesdonot,buthavethepotentialforgreaterreturns.

Ahybridannuity(alsocalledacombinationannuity)combinesthefeaturesofafixedannuityandavariableannuity.

Adeferredannuityisanannuitythatdelaysincomepaymentsuntiltheholderchoosestoreceivethem.Animmediateannuityisonethatbeginspaymentsimmediatelyuponpurchase.

Alifeannuitycontinuestopayoutaslongastheownerisalive.Asingle-lifeannuityprovidesincomebenefitsforonlyoneperson.Ajointlifeannuityisissuedontwoindividuals,andpaymentscontinueinwholeorinpartaslongaseitherindividualisalive.

(2)Generally,apersonwhoholdsanannuityfromwhichheorsheisnotyetreceivingpaymentswillalsobeearningincome.Inmostinstances,afixedannuitywillbeearninginterestataspecifiedfixedratesimilartointerestearnedbyaCD.Avariableannuitywillearn(orlose)basedonmarketfluctuations,asinamutualfund.

(3)Mostannuitieschargesurrenderorwithdrawalfees.Inaddition,earlywithdrawalusuallyresultsintaxpenalties.

(4)Dependingonthetypeofannuityandthecurrentstatusoftheannuity,theownerwillneedtoaskdifferentquestionsoftheverificationsource,whichwillnormallybetheapplicantortenant’sinsurancebroker.

b.Incomeaftertheholderbeginsreceivingpayments.

(1)Whenverifyinganannuity,ownersshouldasktheverificationsourcewhethertheholderoftheannuityhastherighttowithdrawthebalanceoftheannuity.Forannuitieswithoutthisright,theannuityisnottreatedasanasset.

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(2)Generally,whentheholderhasbegunreceivingannuitypayments,theholdercannolongerconvertittoalumpsumofcash.Inthissituation,theholderwillreceiveregularpaymentsfromtheannuitythatwillbetreatedasregularincome,andnocalculationsofincomefromassetswillbemade.**

c.Calculationswhenanannuityisconsideredanasset.

(1)Whenanapplicantortenanthastheoptionofwithdrawingthebalanceinanannuity,theannuitywillbetreatedlikeanyotherasset.**Itwillbenecessarytodeterminethecashvalueoftheannuityinadditiontodeterminingtheactualincomeearned.

(2)Inmostinstances,anannuityfromwhichpaymentshavenotyetbeenmadeisearningincomeonthebalanceintheannuity.AfixedannuitywillearnincomeatafixedrateinthesamemannerthataCDearnsincome.Avariableannuitywillearn(orlose)basedoncurrentmarketconditions,aswithamutualfund.

(3)Theownerwillneedtoverifywiththeinsuranceagentorotherappropriatesource:

Therightoftheholdertowithdrawthebalance(evenifpenaltiesareinvolved).

Thebasisonwhichtheannuitymaybeexpectedtogrowduringthecomingyear.

Thesurrenderorearlywithdrawalpenaltyfee.

Thetaxrateandthetaxpenaltythatwouldapplyifthefamilywithdrewtheannuity.

(4)Thecashvaluewillbethefullvalueoftheannuity,lessthesurrender(orwithdrawal)penalty,andlessanytaxesandtaxpenaltiesthatwouldbedue.

(5)Theactualincomeisthebalanceintheannuitytimesthepercentage(eitherfixedorvariable)atwhichtheannuityisexpectedtogrowoverthecomingyear.(Thismoneywillbereinvestedintotheannuity,butitisstillconsideredactualincome.)

(6)Theimputedincomefromtheassetiscalculatedonlyafterthecashvalueofallfamilyassetshasbeendetermined.

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imputedincomefromassetsiscalculatedonthetotalcashvalueofallfamilyassets.

3.Lumpsumreceiptscountedasassets.

a.Commonly,whenafamilyreceivesalargeamountofmoney,alumpsumpayment,thefamilywillputthemoneyinacheckingorsavingsaccount,orwillpurchasestocksorbondsoraCD.Ownersmustcountlumpsumpaymentsreceivedbyatenantasassets.Examplesoflumpsumpaymentsincludethefollowing:

(1)Inheritances;

(2)Capitalgains;

(3)Lotterywinningspaidinonepayment;

(4)Cashfromthesaleofassets;

(5)Insurancesettlements(includinghealthandaccidentinsurance,workerscompensation,andpersonalandpropertylosses);and

(6)Anyotheramountsthatarereceivedinone-timelumpsumpayments.

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b.Alumpsumpaymentiscountedasanassetonlyaslongasthefamilycontinuestopossessit.Ifthefamilyusesthemoneyforsomethingthatisnotanasset—acaroravacationoreducation—thelumpsummustnotbecounted.

c.Itispossiblethatalumpsumoranassetpurchasedwithalumpsumpaymentmayresultinenoughincometorequirethefamilytoreporttheincreasedincomebeforethenextregularlyscheduledannualrecertification.Butthisrequirementtoreportanincreaseinincomebeforethenextannualrecertificationwouldnotapplyiftheincomefromtheassetwasnotmeasurablebythetenant(e.g.,gems,stampcollection).

4.Balancesheldinretirementaccounts.

a.Balancesheldinretirementaccountsarecountedasassetsifthemoneyisaccessibletothefamilymember.Forindividualsstillemployed,accessibleamountsarecountedevenifwithdrawalwouldresultinapenalty.However,amountsthatwouldbeaccessibleonlyifthepersonretiredarenotcounted.

b.IRA,Keogh,andsimilarretirementsavingsaccountsarecountedasassets,eventhoughwithdrawalwouldresultinapenalty.

c.Includecontributionstocompanyretirement/pensionfunds:

(1)Whileanindividualisemployed,countonlyamountsthefamilycanwithdrawwithoutretiringorterminatingemployment.

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Section1:

Determining AnnualIncome

(2)Afterretiringorterminatingemployment,countasanassetanyamounttheemployeeelectstoreceiveasalumpsum.

d.Includeinannualincomeanyretirementbenefitsreceivedthroughperiodicpayments.

5.*FederalGovernment/UniformedServicesPensions

Ininstanceswheretheapplicant/tenantisaretiredFederalGovernment/UniformedServicesemployeereceivingapensionthatis*determinedbyastatecourtinadivorce,annulmentofmarriage,orlegalseparationproceedingtobeamaritalassetandthecourtprovidesOPMwiththeappropriateinstructionstoauthorizeOPMtoprovidepaymentofaportionoftheretiree’spensiontoaformerspouse,thatportiontobepaiddirectlytotheformerspouseisnotcountedasincomefortheapplicant/tenant.However,wherethetenant/applicantistheformerspouseofaretiredFederalGovernment/UniformedServicesemployee,anyamountsreceivedpursuanttoacourtorderedsettlementinconnectionwithadivorce,annulmentofmarriage,orlegalseparationarereflectedonaForm-1099andiscountedasincomefortheapplicant/tenant.(SeeParagraph5-6.K.4formoreinformationonFederalGovernment/UniformedServicespensionfundspaidtoaformerspouse.)

6.*Otherstate,localgovernment,socialsecurityorprivatepensions.

Otherstate,localgovernment,socialsecurityorprivatepensionswherepensionsarereducedduetoacourtorderedsettlementinconnectionwithadivorce,annulmentofmarriage,orlegalseparationandpaiddirectly totheformerspousearenotcountedasincomefortheapplicant/tenantandshouldbehandledinthesamemanneras5,above.*

7.Mortgageordeedoftrust.

a.Occasionally,whenanindividualsellsapieceofrealestate,thesellermayloanmoneytothepurchaserthroughamortgageordeedoftrust.Thismaybereferredtoasa“contractsale.”

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Section1:DeterminingAnnual Income

b.Amortgageordeedoftrustheldbyafamilymemberisincludedasanasset.Paymentsonthistypeofassetareoftenreceivedasonecombinedpaymentthatincludesinterestandprincipal.Thevalueoftheassetistheunpaidprincipalasoftheeffectivedateofthecertification.Eachyearthisbalancewilldeclineasmoreprincipalispaidoff.Theinterestportionofthepaymentiscountedasactualincomefromanasset.

8.Assetsdisposedofforlessthanfairmarketvalue.Applicantsandtenantsmustdeclarewhetheranassethasbeendisposedofforlessthanfairmarketvalueateachcertificationandrecertification.Ownersmustcountassetsdisposedofforlessthanfairmarketvalueduringthetwoyearsprecedingcertificationorrecertification.Theamountcountedasanassetisthedifferencebetweenthecashvalueandtheamountactuallyreceived.(ThisprovisiondoesnotapplytofamiliesreceivingonlyBMIRassistance.)

a.Anyassetthatisdisposedofforlessthanitsfullvalueiscounted,includingcashgiftsaswellasproperty.Todeterminetheamountthathasbeengivenaway,ownersmustcomparethecashvalueoftheassettoanyamountreceivedincompensation.

b.However,theruleappliesonlywhenthefairmarketvalueofallassetsgivenawayduringthepasttwoyearsexceedsthegrossamountreceivedbymorethan$1,000.

c.Whenthetwo-yearperiodexpires,theincomeassignedtothedisposedassetalsoexpires.Ifthetwo-yearperiodendsinthemiddleofarecertificationyear,thetenantmayrequestaninterimrecertificationtoremovethedisposedasset(s).*However,iftheownerelectstoonlyincludetheincomeforapartialremainingyearasshownintheexamplebelow,aninterimrecertificationshouldnotbeconducted.*

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d.Assetsdisposedofforlessthanfairmarketvalueasaresultofforeclosure,bankruptcy,divorce,orseparationarenotcounted.

e.Assetsplacedinnonrevocabletrustsareconsideredasassetsdisposedofforlessthanfairmarketvalueexceptwhentheassetsplacedintrustwerereceivedthroughsettlementsorjudgements.

f.Applicantsandtenantsmustsignaself-verificationformattheirinitialcertificationandeachannualrecertificationidentifyingallassetsthathavebeendisposedofforlessthanfairmarketvalueorcertifyingthatnoassetshavebeendisposedofforlessthanfairmarketvalue.

g.Ownersneedtoverifythetenantselfcertificationonlyiftheinformationdoesnotappeartoagreewithotherinformationreportedbythetenant/applicant.

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Section1:DeterminingAnnual Income

Section2:DeterminingAdjustedIncome

Section2doesnotapplytofamiliesapplyingfororoccupying221(d)(3)BMIRunitswithoutadditionalsubsidy.

5-8KeyRegulations

ThisparagraphidentifiesthekeyregulatorycitationpertainingtoSection2:DeterminingAdjustedIncome.Thecitationanditstopicarelistedbelow.

  • 24CFR5.611AdjustedIncome

5-9KeyRequirementsforDeterminingAdjustedIncome

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A.Therearefivepossibledeductionsthatmaybesubtractedfromannualincomebasedonallowablefamilyexpensesandfamilycharacteristics.Theremainder,afterthesedeductionsaresubtracted,iscalledadjustedincome.Adjustedincomeisgenerallytheamountuponwhichrentisbased.SeeSection4ofthischapterforinformationaboutspecificrentcalculationmethods.Thissectionfocusesonthecalculationofannualadjustedincome.Beforerentiscalculated,annualadjustedincomeisconvertedtomonthlyadjustedincome.

B.Ofthefivepossibledeductions,threeareavailabletoanyassistedfamily,andtwoarepermittedonlyforelderlyordisabledfamilies.

1.Thethreetypesofdeductionsavailabletoanyassistedfamilyare:

a.Adeductionfordependents;

b.Achildcarededuction;and

c.Adisabilityassistancededuction.

2.Thetwotypesofdeductionspermittedonlyforfamiliesinwhichthehead,spouse,orco-headiselderlyordisabledare:

a.Anelderly/disabledfamilydeduction;and

b.Adeductionforunreimbursedmedicalexpenses.

NOTE:Afamilymaynotdesignateafamilymemberasheadorco-headsolelytobecomeeligiblefortheseadditionalbenefits.Theremainingmemberofafamilylistedinparagraph5-9B.2whoisnot62orolderorapersonwithdisabilitiesisnoteligiblefortheseallowances.

5-10CalculatingAdjustedIncome

A.DependentDeduction

1.Afamilyreceivesadeductionof$480foreachfamilymemberwhois:

a.Under18yearsofage;

b.Apersonwithdisabilities;or

c.Afull-timestudentofanyage.

2.Somefamilymembersmayneverqualifyasdependentsregardlessofage,disability,orstudentstatus.

a.Theheadofthefamily,thespouse,andtheco-headmayneverqualifyasdependents.

b.Afosterchild,anunbornchild,achildwhohasnotyetjoinedthefamily,oralive-inaidemayneverbecountedasadependent.

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3.Afull-timestudentisonewhoiscarryingafull-timesubjectloadataninstitutionwithadegreeorcertificateprogram.Afull-timeloadisdefinedbytheinstitutionwherethestudentisenrolled.

4.Whenmorethanonefamilysharescustodyofachildandbothliveinassistedhousing,onlyonefamilyatatimecanclaimthedependentdeductionforthatchild.Thefamilywithprimarycustodyorwithcustodyatthetimeoftheinitialcertificationorannualrecertificationreceivesthededuction.Ifthereisadisputeaboutwhichfamilyshouldclaimthedependentdeduction,the**owner**shouldrefertoavailabledocumentssuchascopiesofcourtordersoranIRSreturnshowingwhichfamilyhasclaimedthechildforincometaxpurposes.

B.ChildCareDeduction

1.Anticipatedexpensesforthecareofchildrenunderage13(includingfosterchildren)maybedeductedfromannualincomeifallofthefollowingaretrue:

a.Thecareisnecessarytoenableafamilymembertowork,seekemployment,orfurtherhis/hereducation(academicorvocational).

b.Thefamilyhasdeterminedthereisnoadultfamilymembercapableofprovidingcareduringthehourscareisneeded.

c.Theexpensesarenotpaidtoafamilymemberlivingintheunit.

d.Theamountdeductedreflectsreasonablechargesforchildcare.

e.Theexpenseisnotreimbursedbyanagencyorindividualoutsidethefamily.

f.Childcareexpensesincurredtopermitafamilymembertoworkmustnotexceedtheamountearnedbythefamilymembermadeavailabletoworkduringthehoursforwhichchildcareispaid.

2.Whenchildcareenablesafamilymembertoworkorgotoschool,therulelimitingthedeductiontotheamountearnedbythefamilymembermadeavailabletoworkappliesonlytochildcareexpensesincurredwhiletheindividualisatwork.Theexpenseforchildcarewhilethatfamilymemberisatschoolorlookingforworkisnotlimited.

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Example–ChildCareDeduction

SeparateExpensesforTimeatWorkandTimeatSchool

Bernice and Ernest have two children. Both parents work, but Berniceworksonly part-timeand goes to school half time.She pays $4.00 an hour for eighthours of childcare aday.For fourof those hours, she isat work; forfourofthem she attendsschool.She receivesno reimbursement for her childcareexpense.

Her annual expense for child care duringthehoursshe works is $4,000.Herannual expense forthe hoursshe is at schoolis also $4,000.She earns

$6,000 a year.Ernest earns$18,000.

The rule requires that Bernice’s child care expense while she is working notexceed the amount she isearning whileatwork.In this case, that is not aproblem.Bernice earns $6,000 during the timesheispaying $4,000.

Therefore, her deduction for the hourswhile she is working is $4,000.

Bernice’s expense while she isatschoolisnot compared toher earnings.Her expenseduring thosehoursis $4,000, and her deduction forthose hourswill also be $4,000.

Bernice’s totalchildcare deduction is $8,000 ($4,000 + $4,000).Thetotaldeduction exceeds the amount of Bernice’s total earnings, but the amountshe pays during the hourssheworks does not exceed her earnings.

If Bernice’s child care costs forthe hours while she workswere greater thanher earnings, shewould not beableto deduct allofher child carecosts.

Bernice is payinga total of $8,000 in child care expenses.Of thatexpense,paymentsof$4,000coverthehours while she isin school; payments of

$4,000coverthe hours sheworks.If Bernicewere earning $3,500, her totalchildcare deduction forthehourssheworks wouldbe capped attheamountofmoneysheearns.Inthis case, the total deductionwould be $7,500($4,000 for expenseswhile she is inschool plus$3,500 ofthe amount shepays while she is working.)

3.Childcareattributabletotheworkofafull-timestudent(exceptforhead,spouse,co-head)islimitedtonotmorethan$480,sincetheemploymentincomeoffull-timestudentsinexcessof$480isnotcountedintheannualincomecalculation.Childcarepaymentsonbehalfofaminorwhois notlivingintheapplicant’shouseholdcannotbededucted.

4.Childcareexpensesincurredbytwoassistedhouseholdswithsplitcustodycanbesplitbetweenthetwohouseholdswhenthecustodyandexpenseisdocumentedforeachhouseholdandthedocumentationdemonstratesthatthetotalexpenseclaimedbythetwohouseholdsdoesnotexceedthecostfortheactualtimethechildspendsincare.

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C.DeductionforDisabilityAssistanceExpense

1.Familiesareentitledtoadeductionforunreimbursed,anticipatedcostsforattendantcareand“auxiliaryapparatus”foreachfamilymemberwhois apersonwithdisabilities,totheextenttheseexpensesarereasonableandnecessarytoenableanyfamilymember18yearsofageorolderwhomayormaynotbethememberwhoisapersonwithdisabilitiestobeemployed.

2.Thisdeductionisequaltotheamountbywhichthecostofthecareattendantorauxiliaryapparatusexceeds3%ofthefamily’sannualincome.However,thedeductionmaynotexceedtheearnedincomereceivedbythefamilymemberormemberswhoareenabledtoworkbytheattendantcareorauxiliaryapparatus.

3.Ifthedisabilityassistanceenablesmorethanonepersontobeemployed,theownermustconsiderthecombinedincomesofthosepersons.Forexample,ifanauxiliaryapparatusenablesapersonwithadisabilitytobeemployedandfreesanotherpersontobeemployed,theallowancecannotexceedthecombinedincomesofthosetwopeople.

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Head’s earned incomeSpouse’s earned incomeTotal income / $14,500
+$12,700
$27,200
Care expenses for disabled 15-year-old / $3,850
Calculation: / $3,850
(3% of annual income) / -$816
Allowable disability assistance expenses / $3,034

4.Auxiliaryapparatusincludesitemssuchaswheelchairs,ramps,adaptationstovehicles,orspecialequipmenttoenableasight-impairedpersontoreadortype,butonlyiftheseitemsaredirectlyrelatedtopermittingthedisabledpersonorotherfamilymembertowork.

a.Includepaymentsonaspecially-equippedvantotheextenttheyexceedthepaymentsthatwouldberequiredonacarpurchasedfortransportationofapersonwhodoesnothaveadisability.

b.Thecostofmaintenanceandupkeepofanauxiliaryapparatusisconsideredadisabilityassistanceexpense(e.g.,theveterinariancostsandfoodcostsofaserviceanimal;thecostofmaintainingtheequipmentthatisaddedtoacar,butnotthecostofmaintainingthecar).

c.Iftheapparatusisnotusedexclusivelybythepersonwithadisability,theownermustproratethetotalcostandallowaspecificamountfordisabilityassistance.

5.Inadditiontoanticipated,ongoingexpenses,one-timenonrecurringexpensesofacurrentresidentforauxiliaryapparatusmaybeincludedinthecalculationofthedisabilityassistanceexpensedeductionaftertheexpenseisincurred.Theseexpensesmaybeaddedtothefamily’stotaldisabilityassistanceexpenseeitheratthetimetheexpenseoccursthroughaninterimrecertificationorintherentcalculationduringthefollowingannualrecertification.

6.Attendantcareincludesbutisnotlimitedtoreasonableexpensesforhomemedicalcare,nursingservices,housekeepinganderrandservices,interpretersforhearing-impaired,andreadersforpersonswithvisualdisabilities.

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works full time.Kenisha works part timeat thelibrary.
special transportation to get to her job. / She requires a motorizedwheelchair and
Grace Prior‘s IncomeKenisha Prior’s IncomeTotal income / $24,000
+5,000
$29,000
Disability Assistance Expense / $8,000
(3% of annual income) / -$870
$7,130

7.Whenthesameprovidertakescareofchildrenandadisabledpersonoverage12,theownermustproratethetotalcostandallocateaspecificcosttoattendantcare.Thesumofbothchildcareanddisabilityassistanceexpensescannotexceedtheemploymentincomeofthefamilymemberenabledtowork.

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D.MedicalExpenseDeduction

1.Themedicalexpensedeductionispermittedonlyforfamiliesinwhichthehead,spouse,orco-headisatleast62yearsoldorisapersonwithdisabilities(elderlyordisabledfamilies).

2.Ifthefamilyiseligibleforamedicalexpensededuction,ownersmustincludetheunreimbursedmedicalexpensesofallfamilymembers,includingtheexpensesofnonelderlyadultsorchildrenlivinginthefamily.

3.Medicalexpensesincludeallexpensesthefamilyanticipatestoincurduringthe12monthsfollowingcertification/recertificationthatarenotreimbursedbyanoutsidesource,suchasinsurance.

4.Theownermayusetheongoingexpensesthefamilypaidinthe12monthsprecedingthecertification/recertificationtoestimateanticipatedmedicalexpenses.

5.Themedicalexpensedeductionisthatportionoftotalmedicalexpensesthatexceeds3%ofannualincome.

6.Inadditiontoanticipatedexpenses,pastone-timenonrecurringmedicalexpensesthathavebeenpaidinfullmaybeincludedinthecalculationofthemedicalexpensededuction**forcurrenttenantsataninitial,interimorannualrecertification.Pastone-timenonrecurringmedicalexpensesthathavebeenpaidinfullarenotapplicablewhencalculatinganticipatedmedicalexpensesatmove-in.**Ifthetenantisunderapaymentplan,theexpensewouldbecountedasanticipated

a.Therearetwooptionsforaddressingone-timemedicalexpenses.Theseexpensesmaybeaddedtothefamily’stotalmedicalexpenseseither:(1)atthetimetheexpenseoccurs,throughaninterimrecertification,or(2)attheupcomingannualrecertification

NOTE:Iftheone-timeexpenseisaddedataninterimrecertification,itcannotbeaddedtoexpensesattheannualrecertification.

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b.Thefollowingexampleillustratesthetwooptions.Tenantsmayuseeitheroption.

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Thefollowingexampleillustratesthetwooptions.Tenantsmayuseeitheroption.Example–One-Time,NonrecurringMedicalExpenses

Maria and Gustav Crumplerhad a total of $2,932 inmedical expenses last year (Year 1).Of thisamount, $932covered Gustav’s gall bladder surgery;$2,000was for routine coststhatare expectedto re-occur inthe coming year. The entire amount maybe included intheCrumpler’smedicalcostsforthe coming year (Year2) despite thefactthat thegall bladdersurgery is a past event that is notlikely to re-occur.

If, during the coming year (Year 2), theCrumplers experience additional one-time medical costs notanticipated atthe annual recertification, theymay request an interimrecertification orwaitfor theirnextannual recertification(during Year3)and ask forthe unanticipated expenses tobe included inthemedical expense calculation forthe following year.

The owner maywishto explain to residents that including past one-time medical expenses inanannual recertification rather thaninaninterim recertification will result inarent reduction fora largernumber ofmonths.

For example, letus assume Maria has unanticipateddental surgery during Year2 at a cost of $3,550sixmonths after the annualrecertification.TheCrumpler’scurrent TTPis $560; their annual incomeis $25,000.

Annual income / $25,000
Less elderly household deduction / -$400
Less allowable medical deduction / ($2,932 less 3% of $25,000) / - $2,182
Adjusted annual income / $22,418
Adjusted monthly income / $1,868
TTP / $560

IftheCrumplersrequest aninterim recertification, the$3,550 additional costwilllower their rent for6months; if they wait for their annualrecertification, thecostofthe dental surgery willaffect their rentfor 12 months.

Annual income / $25,000
Less elderly household deduction / -$400
Less allowable medical deduction* / ($6,482 less 3%of $25,000) / -$5,732
Adjusted annual income / $18,868
Adjusted monthly income / $1,572
TTP / $472

AttheCrumplers’current annual income, thelarge dental bill reduces rent by$88.

OPTION #1:If the Year 2 rent is adjusted through an interim recertification, theCrumplerswillsave6months times $88 or $528.

OPTION #2:IftheCrumplerswaituntiltheir annualrecertification, the large bill will affect their rentfor the 12 months of Year3, and theywill save twice as much, or $1,056.

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7.Whenafamilyismakingregularpaymentsovertimeonabillforapastone-timemedicalexpense,thosepaymentsareincludedinanticipatedmedicalexpenses.However,ifafamilyhasreceivedadeductionforthefullamountofamedicalbillitispayingovertime,thefamilycannotcontinuetocountthatbillevenifthebillhasnotyetbeenpaid.

8.Notallelderlyordisabledapplicantsorparticipantsareawarethattheirunreimbursedexpensesformedicalcareareincludedinthecalculationofadjustedincomeforelderlyordisabledfamilies.Forthatreason,itisimportantforownerstoaskenoughquestionstoobtaincompleteinformationaboutallowablemedicalexpenses.Thefollowinglisthighlightssomeofthemostcommonexpensesthatmaybededucted.Alist ofexamplesofeligiblemedicalexpensesmaybefoundinExhibit5-3.

a.Servicesofdoctorsandhealthcareprofessionals;

b.Servicesofhealthcarefacilities;

c.MedicalinsurancepremiumsorcostsofanHMO;

d.Prescription/nonprescriptionmedicinesthathavebeenprescribedbyaphysician;

e.Transportationtotreatment;

f.Dentalexpenses;

g.Eyeglasses,hearingaids,batteries;

h.Live-inorperiodicmedicalassistancesuchasnursingservices,orcostsforanassistanceanimalanditsupkeep;

i.Monthlypaymentsonaccumulatedmedicalbills;

j.Medicalcareofapermanentlyinstitutionalizedfamilymemberif

hisorherincomeisincludedinannualincome;and

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k.Long-termcareinsurancepremiums.Thefamilymemberpayingalong-termcareinsurancepremiummustsignacertification(**seeSampleCertificationforQualifiedLong-TermCareInsuranceExpensesinExhibit5-4**)thatstatestheinsuranceisguaranteedrenewable,doesnotprovideacashsurrendervalue,willnotcoverexpensescoveredunderMedicare,andrestrictstheuseofrefunds. Thecertificationmustbemaintainedinthefamily’soccupancyfile.(Paragraph5-6J.3describessituationsinwhichlong-termcareinsurancepaymentsmustbeincludedinannualincome.)

9.Specialcalculationforfamilieseligiblefordisabilityassistanceandmedicalexpensedeductions.Ifanelderlyfamilyhasbothunreimbursedmedicalexpensesanddisabilityassistanceexpenses,aspecialcalculationisrequiredtoensurethatthefamily’s3%ofincomeexpenditureisappliedonlyonetime.Becausethedeductionfordisabilityassistanceexpensesislimitedbytheamountearnedbythepersonenabledtowork,thedisabilitydeductionmustbecalculatedbeforethemedicaldeductioniscalculated.

a.Whenafamilyhasunreimburseddisabilityassistanceexpensesthatarelessthan3%ofannualincome,thefamilywillreceivenodeductionfordisabilityassistanceexpense.However,thedeductionformedicalexpenseswillbeequaltotheamountbywhichthesumofbothdisabilityandmedicalexpensesexceeds3%ofannualincome.

b.Ifthedisabilityassistanceexpenseexceedstheamountearnedbythepersonwhowasenabledtowork,thedeductionfordisabilityassistancewillbecappedattheamountearnedbythatindividual.Whenthefamilyisalsoeligibleforamedicalexpensededuction,however,the3%mayhavebeenexhaustedinthefirstcalculation,anditthenwillnotbeappliedtomedicalexpenses.

c.Whenafamilyhasbothdisabilityassistanceexpensesandmedicalexpenses,itisimportanttoreviewthecollectedexpensestobesurenoexpensehasbeeninadvertentlyincludedinbothcategories.

E.ElderlyFamilyDeduction

Anelderlyordisabledfamilyisanyfamilyinwhichthehead,spouse,orco-head(orthesolemember)isatleast62yearsofageorapersonwithdisabilities.

Eachelderlyordisabledfamilyreceivesa$400familydeduction.Becausethisisa“familydeduction”eachfamilyreceivesonlyonededuction,evenifboththeheadandspouseareelderlyordisabled.

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F.NoDeductionforAlimonyorChildSupportPaidtoaPersonoutsidetheAssistedFamily

Thereisnodeductionforanamountpaidtoapersonoutsidetheassistedfamilyforalimonyorchildsupport.Eveniftheamountisgarnishedfromthewagesofafamilymember,itmustbeincludedinannualincome.

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Section 3: Verification

5-11Key Regulations

ThisparagraphidentifieskeyregulatorycitationspertainingtoSection3:Verification.Thecitationsandtheirtitles(ortopics)arelistedbelow.

A.24CFRpart5,subpartB–DisclosureandVerificationofSocialSecurityNumbersandEmployerIdentificationNumbers;ProceduresforObtainingIncomeInformation

B.24CFR5.659FamilyInformationandVerification

C.24CFR8.24,8.32,100.204(Reasonableaccommodation)

5-12VerificationRequirements

A.KeyRequirements

1.Ownersmustverifyallincome,assets,expenses,deductions,familycharacteristics,andcircumstancesthataffectfamilyeligibilityorlevelofassistance.

2.Applicantsandadultfamilymembersmustsignconsentformstoauthorizetheownertocollectinformationtoverifyeligibility,income,assets,expenses,anddeductions.Applicantsandtenantswhodonotsignrequiredconsentformswillnotreceiveassistance.

3.Familymembers6yearsofageandoldermustprovidetheownerwithacompleteandaccuratesocialsecuritynumber.Foranymembersofthefamilywhodonothaveasocialsecuritynumber,theapplicantorfamilymembermustcertifythattheindividualhasneverreceivedasocialsecuritynumber.Thisrequirementisdescribedinparagraphs3-9and3-

**31**ofthishandbook.

4.TheownermusthandleanyinformationobtainedtoverifyeligibilityorincomeinaccordancewiththePrivacyAct.

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Figure5-4:PrivacyActNotice

B.TimeframeforConductingVerifications

Ownersconductverificationsatthefollowingthreetimes.

1.Ownersmustverifyincome,assets,expenses,anddeductionsandalleligibilityrequirementspriortomove-in.

2.Ownersmustverifyeachfamily’sincome,assets,expenses,anddeductionsaspartoftheannualrecertificationprocess.RefertoChapter7,Section1forinformationonannualrecertifications.

3.Ownersmustverifychangesinincome,allowances,orfamilycharacteristicsreportedbetweenannualrecertifications.RefertoChapter7,Section2forinformationoninterimrecertifications.

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5-13AcceptableVerificationMethods

A.MethodsofVerification

OwnersmustuseverificationmethodsthatareacceptabletoHUD.Theownerisresponsiblefordeterminingiftheverificationdocumentationisadequateandcredible.HUDacceptsthreemethodsofverification.Theseare,inorderofacceptability,third-partyverification,reviewofdocuments,andfamilycertification. Ifthird-partyverificationisnotavailable,ownersmustdocumentthetenant filetoexplainwhythird-partyverificationwasnotavailable.Appendix3 providesadetailedlistofacceptableformsofverificationbytypeofinformation.

B.Third-PartyVerification

Thefollowingdescribeswaysinwhichthird-partyverificationmaybeobtained.

1.Written.Writtendocumentationsentdirectlybyathird-partysourceisthepreferredmethodofverification.Itisassumedthatthird-partysourceswillsendwrittenverificationtotheownerthroughthemail.(Forinformationaboutelectronicdocumentation,seesubparagraphB3below.)

Theapplicantortenantshouldnothand-carrytheverificationtoorfromthethird-partysource.Iftheverificationdoesnotcontainanoriginalsignatureorisdeliveredbytheapplicantortenant,theownershouldexaminethedocumentforevidenceoftampering.Inthesesituations,theownermay,butdoesnothaveto,acceptthedocumentasacceptableverification.

2.Oral.Oralverification,bytelephone,fromareliablethird-partysourceisanacceptableverificationmethod.Ownersfrequentlyusethismethodwhenthethirdpartydoesnotrespondtothewrittenverificationrequest.Whenverifyinginformationoverthetelephone,itisimportanttobecertainthatthepersononthetelephoneisthepartyheorsheclaimstobe.Generally,itisbesttotelephonetheverificationsourceratherthantoacceptverificationfromasourcecallingthepropertymanagementoffice.Oralverificationmustbedocumentedinthefile,asdescribedinparagraph5-19C.

NOTE:Appendix3includesselectedphonenumbersofverificationsourcesforemploymentandincomerecords.However,theydonottaketheplaceofthirdpartyverification.ThephonenumberscontainedinAppendix3arenottollfreebutsuchcallsarevalidprojectexpenses.

3.Electronic.Theownermayobtainaccuratethird-partywrittenverificationbyfacsimile,e-mail,orInternet,ifadequateeffortismadetoensurethatthesenderisavalidthird-partysource.

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a.Facsimile.Informationsentbyfaxismostreliableiftheownerandtheverificationsourceagreetousethismethodinadvanceduringatelephoneconversation.Thefaxshouldincludethecompanynameandfaxnumberoftheverificationsource.

b.E-mail.Similartofaxedinformation,informationverifiedbye-mailismorereliablewhenprecededbyatelephoneconversationand/orwhenthee-mailaddressincludesthenameofanappropriateindividualandfirm.

c.Internet.InformationverifiedontheInternetisconsideredthirdpartyverificationiftheownerisabletoviewweb-basedinformationfromareputablesourceonthecomputerscreen.UseofaprintoutfromtheInternetmayalsobeadequateverificationinmanyinstances. RefertosubparagraphC.ReviewofDocumentsbelow.

C.ReviewofDocuments

1.Anownermayreviewdocumentssubmittedbytheapplicantortenantinoneofthefollowingsituations:

a.Third-partyverificationisnotpossibleorisnotrequired.Forexample,verifyingthatafamilymemberisover62yearsoldismoreappropriatelyaccomplishedbyexaminingabirthcertificatethanthroughthird-partyverification.**Whenthirdpartyverificationisnotpossible,refertoparagraph5-19Efordocumentingthefile.**

b.Third-partyverificationisdelayed.Ifinformationfromathirdpartyisnotreceivedwithintwoweeksofitsrequest,ownersmayconsideroriginaldocumentssubmittedbythetenant.**

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2.Anownermustplacecopiesoftherevieweddocumentsintheapplicant’sortenant’sfile.Ifcopiescannotbemade,thepersonreviewingtheoriginaldocumentsmustlisttherevieweddocumentsandtheinformationprovidedonthedocuments,andmustinitialanddatethenotation.

3.Obtainingaccurateverificationthroughareviewofdocumentsrequirestheownertoconsiderthefollowing:

a.Isthedocumentcurrent?Documentationofpublicassistancemaybeinaccurateifitisnotrecentanddoesnotshowanychangesinthefamily’sbenefitsorworkandtrainingactivities.

b.Isthedocumentationcomplete?Ownersmaynotacceptpaystubstodocumentemploymentincomeunlesstheapplicantortenantprovidesthemostrecent**fourtosix**paystubstoillustratevariationsinhoursworked.Actualpaychecksorcopiesofpaychecksshouldneverbeusedtodocumentincomebecausedeductionsarenotshownonthepaycheck.

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Section3:Verification

c.Isthedocumentanunalteredoriginal?Thegreatestshortcomingofdocumentsasaverificationsourceistheirsusceptibilitytoundetectablechangethroughtheuseofhigh-qualitycopyingequipment.Documentswithoriginalsignaturesarethemostreliable.Photocopieddocumentsgenerallycannotbeassumedtobereliable.

D.FamilyCertification

Anownermayacceptatenant’snotarizedstatementorsignedaffidavitregardingtheveracityofinformationsubmittediftheinformationcannotbeverifiedbyanotheracceptableverificationmethod.

5-14IdentifyingAppropriate Verification Sources

Anownermustonlycollectinformationthatisnecessarytodeterminetheapplicant’sortenant’seligibilityforassistanceorlevelofassistance.Appendix3providesalistofacceptableformsofthird-partyverification.

5-15RequiredVerificationandConsentForms

A.ConsentandVerificationForms

Adultmembersofassistedfamiliesmustauthorizeownerstorequestindependentverificationofdatarequiredforprogramparticipation.Toprovideowners withthisauthorization,adultfamilymembersmustsigntwoHUD-requiredconsentformsplustheowner’sspecializedverificationforms.Ownersmustcreate theirownverificationformstorequestinformationfromemployers,childcareproviders,medicalprofessionals,andothers.FamiliessigntheseandthetwoHUDconsentformsatthetimeofmove-incertificationandannualrecertification. Alladultsineachassistedfamilymustsigntherequiredconsentforms orthefamilymustbedeniedassistance.Ownersmustgivethefamilyacopy ofeachformthefamilysigned,aHUDFactSheet,andtheResidentRightsand Responsibilitiesbrochure.

B.HUD-RequiredConsentandReleaseForms

ApplicantsandtenantsmustsigntwoHUD-requiredconsentforms.

1.FormHUD-9887,NoticeandConsenttotheReleaseofInformationtoHUDandtoaPHA.Eachadultmembermustsigntheformregardlessofwhetherheorshehasincome.*Eachfamilymemberwhoisatleast18yearsofageandthehead,spouseorco-head,regardlessofage,mustsignthisformatmove-in,initialandateachannualrecertification.Theformmustalsobesignedwhenanewadultmemberjoinsthehousehold.* Theformisvalidfor15monthsfromthedateofsignature.The consentallowsHUDorapublichousingagencytoverifyinformationwith theInternalRevenueService,theSocialSecurityAdministration,andwithstateagenciesthatmaintainwageandunem,ploymentclaiminformation. Ownersmustkeeptheoriginalsignedforminthetenant’s