Calculating Imputed Income vs. Actual Income from Bank Accounts

Q I'm in the process of certifying an applicant's annual income. The applicant has a considerable amount of money spread out over various checking and saving accounts. Most of the applicant's money resides in checking accounts that earn no interest. How do I do the income calculations from these accounts?

A When certifying a resident's or applicant's annual income, IRS rules require you to examine household assets. Checking account balances and savings account balances are considered assets. Any interest collected from these accounts will count toward the resident's or applicant's annual income.

If the total cash value of a household's assets exceeds $5,000, you must “impute” income to those assets, and compare the imputed income to the actual income. To impute means to calculate by treating the assets as though they have generated income even if they have not.

To calculate imputed income, multiply the cash value of the accounts or assets by the percentage rate specified by HUD. The rate is currently 2 percent. The result is the household's imputed income from assets. Then, compare the imputed income to the actual annual income derived from the assets such as dividends or interest. And use the greater of the two figures in the household's annual income calculations.

For example, suppose an applicant has assets with the following value and actual annual income:

Actual Annual Income = $90

Imputed Income: $10,000 x .02 = $200

Here, because the imputed income is greater than the household's actual annual income, the imputed income amount would be the figure used in the household's annual income from assets calculation.