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Annie Stevenson

Adjusted Income

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Welcome to Lunch N Learn!

Today’s Topics:• Elderly/disabled allowances• Dependant and child care allowances• Medical and disability allowances• Verification of allowances

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Welcome to Lunch N Learn!

Upcoming topics for the occupancy series:• 5/2/08: Verification Issues• 6/12/08: PH Rent Calculation• 6/13/08: HCV Rent Calculation

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Adjusted Income - Background

Previous sessions:• Annual Income

InclusionsExclusions Income from assets

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Adjusted Income - Background

Formula:• Gross Income

Including asset income• Minus exclusions• Equals annual income

First major building block in rent calculation

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Adjusted Income - Introduction

Today’s topic:• ADJUSTED INCOME

Second major building block in rent calculation

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Adjusted Income - Introduction

Form HUD-50058 Section 8• Calculation of adjusted income

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HUD-50058 Section 8: Expected Income Per Year

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HUD-50058 Section 8: Expected Income Per Year

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HUD-50058 Section 8: Expected Income Per Year

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Definitions

Adjusted Income Elderly Family Disabled Family Dependent Household Vs. Family

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Definition of Adjusted Income Total Annual Income minus allowances

• Dependents• Elderly/disabled allowance• Child care• Medical expenses• Disability expenses• Permissible deductions (PH only)

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Deductions and Allowances

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Dependent Allowance

$480 for each family member:• Under 18• Full-time student 18 or older• Person with a disability 18 or older

Head, spouse, co-head, foster child or foster adult, live-in aide are never a dependent

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Elderly/Disability Allowance

$400 per family where the head or spouse is at least 62 or disabled

$400 is the maximum amount the family can receive, even if both head and spouse are elderly or disabled

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Child Care Allowance

Includes reasonable child care expenses PHA determines what is reasonable Care provided for children under 13 years of

age• including foster children

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HUD Interpretation of Child Care Expenses

A PHA may not disallow a deduction for child care expenses because there is an unemployed adult family member who may be available to provide the care.

A PHA may not decide who will provide child care for an applicant’s or a participant’s child(ren).

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HUD Interpretation of Child Care Expenses

A PHA may not decide the type of child care available for a participant’s child(ren).

Citation: Verification Guidebook

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Child Care Expenses

Care enables a family member to • Work• Actively seek work• Attend school

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Child Care Expenses

Costs may be higher in summer and during holidays

Applicant should certify whether any costs are being reimbursed

Child support payments don’t qualify

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Child Care Expenses Child care allowance for work cannot exceed

the income that a family member earns• If more than one member working - which

worker enabled by child care? Member works and attends school

• Prorate expense to compare with amount earned

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Learning Activity 1

Becky Walker’s annual income is $14,621• All from employment

Becky has three children, all under 13 years of age. She is paying a total of $60 per week for child care while she works

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Learning Activity 1 Answers

14,621

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Learning Activity 1 Answers

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Learning Activity 1 Answers

3,120

4,560

1,440

480

3

10,061

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Allowance for Disability Assistance Expense

Anticipated expenses for:• Care attendants• Auxiliary apparatus

Wheelchairs, ramps, vehicle adaptations, special equipment for the blind, etc.

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Allowance for Disability Assistance Expense

IF such expenses • Enable a family member (could be person with

the disability) to WORK• Exceed 3% of annual income• Don’t exceed the earnings of person enabled

to work

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Disability Assistance Expense

If the disability assistance expense enables more than one person to be employed • PHA must combine the income of those

persons to determine the cap

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Allowance for Disability Assistance Expense

Question:• Must a family meet HUD’s definition of a

Disabled Family in order to qualify for Disability Assistance Expenses?

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Disability Assistance Expense

Disability assistance expense/child care• If both child care and disability assistance

expense are needed to enable a person in the family to work, the employment income used to justify the

child care allowance may NOT also be used to justify disability assistance allowance

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Learning Activity 2

Family Name: Gilmore• Head: 38 Earned Income: $ 11,000• Spouse: 32 Earned Income: $ 9,000• Son: 14 (with a disability)• Disability assistance expense/year $ 4,600

enables spouse to work

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Learning Activity 2 Answers

20,000

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Learning Activity 2 Answers

600

9,000

0

4,000

4,600 4,000

4,000

4,000

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Learning Activity 2 Answers

1

4,480

480

480

15,520

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Medical Expenses

Permitted ONLY for family where head, spouse or co-head is at least 62 or disabled

If family eligible, medical expenses deducted for all family members

Anticipate expenses to be incurred during 12 months following certification

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Example

• Head disabled 50 years old• Son 16• Daughter 12• Daughter 1• Live-in attendant

Whose anticipated medical expenses qualify?

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Allowable Medical Expenses

PHA policy determines allowable medical expenses• PHAs may use IRS Publication 502 as a tool • Available at www.irs.gov

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Typical Allowable Medical Expenses

Professional services Services of health care facilities Prescription/nonprescription medicines Medical insurance premiums/co-payments

(includes Medicare premiums)

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Typical Allowable Medical Expenses

Live-in or periodic medical assistance • Nursing services• Costs for assistive animal and its care

Long term care insurance premiums

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Typical Allowable Medical Expenses

Transportation for treatment Dental expenses Eyeglasses, hearing aids Monthly payment on accumulated medical

bills

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Medicare Prescription Drug Discounts and Assistance

PIH 2005-37• Transitional assistance ended in May 2006• Under MMA’s permanent plan, deduction is based

on actual anticipated unreimbursed prescription costs

• Include Medicare prescription drug plan premium, if paid by familySee chart at end of notice

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Medical Allowance

Medical allowance• portion of anticipated medical expenses that

exceed 3% of Annual Income

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Learning Activity 3

Family Name: Alden Head: 81 Spouse: 80 Annual Income: $13,500

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Learning Activity 3

Anticipated medical expenses:• Health Insurance premium- $55 monthly• Eyeglasses $300 annually, each• Doctor visits 4 times a year at $20 each visit• Anticipated yearly prescription costs of $425• Balance Due on a medical bill of $325

(Will be paying it off at $15 a month)

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Learning Activity 3

Anticipated medical expenses:• Health Insurance premium - $55 monthly

$55 x 12 = $660• Eyeglasses $300 annually, each

$300 x 2 = $600• Doctor visits 4 times a year at $20 each visit

$20 x 4 = $80

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Learning Activity 3

Anticipated medical expenses:• Anticipated yearly prescription costs of $425

$425 x 1 = $425• Balance Due on a medical bill of $325

(Will be paying it off at $15 a month)• $15 x 12 = $180

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Learning Activity 3 Total anticipated medical expenses:

• Health Insurance premium - $ 660• Eyeglasses - $ 600• Doctor visits - $ 80• Prescriptions - $ 425• Medical bill - $ 180

TOTAL $1945

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Learning Activity 3 Answers

13,500

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Learning Activity 3 Answers

405

1,945

1,540

1,945

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Learning Activity 3 Answers

400

11,560

1,940

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Disability Assistance/Medical Expense

Some families are eligible for both Because disability expense is capped by

amount earned by the person enabled to work, the disability assistance allowance is calculated before the medical allowance

HUD-50058 walks you through calculation

2-104

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Disability Assistance/Medical Expense

If disability assistance expense is equal to or more than 3% of annual income• deduct 3% from disability assistance expense• compare to earnings made possible by

assistance• add total medical expenses

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Disability/Medical

Disability Expense $2,000- 3% of Annual Income - 500“Proposed” Expense $1,500Amount Earned $1,000Allowable Disability Expense $1,000• All Medical Expense is added $ 300• Total Deduction $1,300

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Disability Assistance/Medical Expense

If disability assistance expense is less than 3% of annual income• Total disability expense is added to the

medical expenses• 3% threshold is subtracted from the total

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Disability/Medical• Disability Expense $ 400• 3% of Annual Income $ 500• Amount Earned $ 1,000Disability Expense $ 400

Plus Medical Expense $ 900Total of Both Expenses $ 1,300

Less 3% of Annual Income - 500• Allowable for Both $ 800

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Permissible Deductions:Public Housing Only

PHA may adopt additional deductions• Must have written policy in ACOP• The amounts may not already be deducted

from annual income

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Permissible Deductions:Public Housing Only

Two kinds of permissible deductions:• Based on need

Example: medical deduction for families that do not meet elderly/disabled definition

• Self-sufficiency incentivesExample: Deduction for second wage earner

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Permissible Deductions:Public Housing Only

PHA must be able to “afford” deductions• No increase in operating subsidy• PHA should estimate cost of deduction before implementing• Must track actual rents AND rents that would have been paid

without permissible deductions

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Permissible Deductions:Public Housing Only

Examples of permissible deductions may include:• Excessive travel expenses not to exceed $25 per

family per week for travel related to employment, education or training

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Permissible Deductions:Public Housing Only

Examples of permissible deductions may include:• An amount of a family’s earned income, based on any of the

following:All the earned income of the familyThe amount earned by particular family members

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Permissible Deductions:Public Housing Only

An amount of a family’s earned income, based on any of the following:

The amount earned by families having certain characteristicsThe amount earned by families, which could include payroll

deductions such as social security taxes, income taxes, and medical insurance premiums

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Verifying Income Deductions

HUD’s 2001 QC report found that 22% of assisted families paid too much rent

Generally, these families did not receive allowances & deductions to which they were entitled

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Verifying Income Deductions

HUD’s verification guidebook addresses verification of deductions & allowances• Q & As on verification requirements for each

deduction• Notice PIH 2004-1

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Verifying Income Deductions

Generally, PHAs should review tenant-provided documents when 3rd-party verification is not available• Review “with scrutiny” so that expenses are

not counted twice and to ensure that ineligible expenses are not counted

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