What is household income?

Definition and Examples of Household Income

How Household Income Works

Types of Household Income

Definition and Examples of Household Income

Household income includes almost all types of income that you and your family members and anyone else living with you bring into your home. Income can be earned or unearned.

Household income determines your eligibility for government assistance programs and some tax credits. The U.S. Census Bureau also tracks household income data for statistical purposes. Household income is typically defined as the sources of earned and unearned income for each person aged 15 years or older living in a household.

Various programs and agencies may exclude certain types of income, such as child support and workers’ compensation benefits. Check with any government program you are considering applying for to get answers to any questions about what counts as income.

How Household Income Works

Household income determines your eligibility for insurance through the health insurance marketplace, financial assistance programs, and some tax benefits. The specific rules regarding household income can vary between entities and programs.

For example, let’s say:

• Joe lives alone and earns $35,000 a year.
• Josie and John live together, just the two of them, and earn a combined $70,000.
• Jackie and Jenny live together and share their home with Jackie’s brother. Their total income is $50,000.

The average of these three incomes – about $51,667 – is slightly more than what a household of three is typically expected to earn. However, it far exceeds the income of Joe or Jackie and Jenny individually. Nonetheless, they are all defined as household income for the purposes of calculating government benefits and other assistance programs.

Types of Household Income

These rules cover almost all sources of income, earned and unearned, but there are some rules that apply to some sources. The list of includable income is long. It can be broken down as follows for the most common programs, but there may be specific rules for other programs, especially for more obscure income sources.

• Taxable wages: your total earnings for the year, after deductions made by your employer for childcare and your contributions to retirement plans and health insurance.
• Self-employment income: your total earnings after deducting allowable business expenses.
• Investment income: includes interest, tax-exempt interest, dividends, rents, and royalties.
• Unemployment compensation.
• Social Security retirement benefits: your total benefits, including taxable and non-taxable portions.
• Social Security disability benefits.
• Supplemental Security Income (SSI): included by the U.S. Census Bureau but not by the health insurance marketplace.
• Workers’ compensation benefits: included by the U.S. Census Bureau but not by the health insurance marketplace.
• Pension or retirement income: includes withdrawals from most individual retirement accounts (IRA) and 401(k) plans, except for certain Roth 401(k) accounts. The U.S. Census Bureau includes both governmental and non-governmental retirement.
• Alimony: only for divorces or separations finalized before January 1, 2019, but the U.S. Census Bureau does not make this distinction.
• Child support: excluded from the health insurance marketplace but included by the U.S. Census Bureau.
• Public assistance: included by the U.S. Census Bureau and by some states.
• Economic stimulus payments received in 2020 or 2021 in response to the COVID-19 pandemic.
• Veterans disability benefits: excluded from household income calculations.
• Financial assistance allowances provided by anyone to the household who does not live there, such as a friend or family members.

These are some common rules regarding household income that encompass most recognized sources of income. There may be some specific rules for other programs and more obscure sources of income.

Source:

https://www.thebalancemoney.com/what-is-household-income-5188180