Follow Five Dos & Don'ts When Calculating Income of Student Household Members
If you have part-time or full-time students living at your tax credit site, it’s important to know how to calculate their income properly. However, be mindful that all student eligibility requirements are met for your LIHTC site before you consider student income in a household. In other words, once you ensure that a low-income prospective household doesn’t violate the student rule, you can focus on income eligibility.
Special rules located in the HUD Occupancy Handbook apply to calculating the income of student household members. And one mistake in your calculations could cause your state housing agency to cite you for noncompliance. A mistake could also lead you to reject eligible prospects, making it more difficult to meet and maintain your site’s minimum set-aside.
Here are five dos and don’ts to help you and your staff members properly calculate the income of households with student members. Our dos and don’ts are based directly on the Handbook’s provisions.
Don’t Count Financial Assistance Members Get to Attend School as Income
When calculating household income, you must exclude all financial assistance to any student, whether full time or part time. Student financial assistance includes grants, scholarships, educational entitlements, work-study programs, and financial aid packages. This is true whether the assistance is paid to the student or directly to the educational institution [HUD Handbook 4350.3, par. 5-6(E)].
Don’t Count Student Loans as Income
HUD has interpreted “financial assistance” to not include loan proceeds for the purpose of determining income. If a household member gets a student loan, don’t include it as part of her household’s income. That’s because the household member must repay the loan.
Always Count Students’ Unearned Income—Even if They Go Away to School
You should always count the unearned income of full- or part-time student household members—even if the student goes away to school and lives in the unit only during school recesses. You must count a full-time student’s unearned income from all sources listed in Exhibit 5-1 of Handbook 4350.3. For instance, if a full-time student gets monthly Social Security income or child support payments from an ex-spouse, you must include these payments in household income [Handbook 4350.3, par. 5-6 (A)(3)(b)].
Count Earned Income of Full-Time Students Age 18 or Older
You must count some or all of a full-time student’s earned income if the student is age 18 or older. How much earned income you must count depends on the student’s status as part of the household. If the full-time student is the head, co-head, or spouse, count all her earned income, just as you would for household members age 18 and older who are part-time students or who don’t attend school [HUD Handbook 4350.3, par. 5-6(A)(3)(f)].
If a full-time student is age 18 or older but isn’t the head, co-head, or spouse, count only the first $480 of her earned income [HUD Handbook 4350.3, par. 5-6(A)(3)(d)]. Students’ earned income typically includes wages they earn from a summer, part-time, or on-campus job.
Also note that the income of full-time students 18 years of age or older who are members of the household but away at school is counted the same as the income for other full-time students [HUD Handbook 4350.3, par. 5-6(A)(3)(e)].
Don’t Count Earned Income of Household Members Under Age 18—Regardless of Student Status
If a household member is under 18 years old, don’t count any of her earned income. It doesn’t matter whether the member is a part-time or full-time student or whether she doesn’t attend school at all. However, benefits or other unearned income of minors is counted [HUD Handbook 4350.3, par. 5-6(A)(3)(b)].
The earned income of a full-time student 18 years old or older who is a dependent is excluded to the extent that it exceeds $480 [HUD Handbook 4350.3, par. 5-6(A)(3)(d)].