HUD Handbook 4350.3 § 5-1

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

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

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

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

                2.       Errors in identifying required income exclusions; and

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

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

        D.      Chapter 5 is organized as follows:

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

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

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

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