Comparing the Three Definitions

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The major differences between the Part 5, Census Long Form, and IRS Form 1040 definitions of annual income can be broken into the following categories.

1. Familiarities and Consistency
   Many PJs have the most experience with the Part 5 definition of annual income, and many have developed administrative procedures and forms based on these rules and requirements.
   The Part 5 definition of annual income was the only definition of annual income used in the HOME Program prior to the publication of the HOME Final Rule in October 1996.
   The Part 5 definition has been used for many years in various HUD programs, such as Section 8 and public housing.
   The Part 5 definition is also used in the Low Income Housing Tax Credit Program, which is often used in combination with HOME Program funding in rental housing projects.
   
   
2. Types of Income to Count
   There are also some differences between the three definitions of income that can result in different income calculations. The three most significant differences between the definitions are:
   Child support payments are not included in the IRS Form 1040 definition of income. The IRS Form 1040 definition allows the deduction of alimony payments.
   Inheritances and insurance settlements are included in the Part 5 asset calculation, but not included in the Census or IRS definitions of annual income.
   
   
3. Treatment of Assets
   The Part 5 definition of annual income requires the special computations concerning assets. The Census Long Form and IRS Form 1040 definitions do not require such calculations. However, income from certain kinds of assets may be included under these definitions.
   

NOTE: A Reminder on Using the Three Definitions
PJs may use more than one definition of annual income within their HOME Program in its entirety. However, PJs must also ensure that applicants to their HOME-funded programs and activities are treated equitably. For this reason, the same definition of income must be used for all applicants within a particular program or activity.

For example, if the PJ chooses to use the Part 5 definition of annual income for its homeownership program, it must apply this definition to all applicants of that program. It may not use the IRS Form 1040 definition of adjusted gross income for one household just because they do not qualify using the Part 5 definition of annual income.