Income Calculations for HUD Programs Presented by Mary Ross President, CEO Ross Business Development, Inc. www.rbdnow.com Introduction Provided Exclusively for Leading Age New York 1
Agenda 10:00 AM Until 12:00 PM Intro Verification Income Income from Assets Deductions Basics Provided Exclusively for Leading Age New York 2
Income Earned Income Unearned Income Income from Assets Verification EIV Third-party Review of Documents Notarized selfcertification Verification Provided Exclusively for Leading Age New York 3
Verification EIV Third-party Written Oral Electronic Review documents Self-certification Third-party HH 4350.3 P 5-13 Written Directly from source SSA/Employer Medical Professional Oral Electronic Internet (such as EIV or online banking) Fax Email Provided Exclusively for Leading Age New York 4
EIV for Earned Income Use EIV plus 4 Current Consecutive Pay Stubs Use Traditional Verification EIV For SS and Medicare Electronic 3 rd Party Verification Use Unless No Data Resident Disputes Data is not complete For HUD programs no other printout is required do not need award/benefit letter Provided Exclusively for Leading Age New York 5
Review of Documents Use When Third-party verification is not possible or is not required Third-party verification is delayed Must document why you did not use 3 rd party Self Certification *An owner may accept a tenant s notarized statement or signed affidavit regarding the veracity of information submitted if the information cannot be verified by another acceptable verification method. *unless prohibited by HUD Provided Exclusively for Leading Age New York 6
Earned Income Employment Income-General Include for HOH, co-hoh or spouse Include for all adults Except Dependents Full-time Students Disabled Except Live-in Aides Provided Exclusively for Leading Age New York 7
Employment Income - Dependents Minors Do not count any employment income unless HOH, co- HOH or spouse Full-time students only count $480 Disabled adult count earned income Unearned Income Provided Exclusively for Leading Age New York 8
Several Sources Social Security VA Pension Retirement Unemployment Etc. Social Security Refer to HH 4350.3 R1, C3, P 5-6 Use Gross Amount x 12 months Do not consider deductions for unpaid Child support Taxes Student loans Etc. Provided Exclusively for Leading Age New York 9
Prior Overpayment If an agency is reducing a family's benefits to adjust for a prior overpayment (e.g., social security, SSI, TANF, or unemployment benefits), count the amount that is actually provided after the adjustment. Gross Repayment Amount x 12 Do not use net amount because it may include other deductions such as Medicare Cents or No Cents Cents If using an award/benefit letter that indicates cents Even if the cents are not paid No Cents If using EIV or another source that does not include cents Provided Exclusively for Leading Age New York 10
HUD Clarification 71. Question: When calculating SS income, owners/agents should use the gross amount. But, do owners/agents include the cents on SS payment amounts, although not received? For example, if the gross amount is $570.20, but the net is $570, do owners/agents calculate as $570.20 x 12? Answer: When calculating Social Security income, use the gross amount shown on the third-party verification, including cents. VA Disability Section 8 Exclude Deferred Payments* Count Periodic Monthly Amounts** Non Section 8 236 PRAC PAC BMIR Count Deferred Payments Count Periodic Monthly Amounts Provided Exclusively for Leading Age New York 11
Aid & Attendance HUD clarified that VA Aid and Attendance income is included in the annual income calculation New Bill has been introduced by Congressmen Joe Heck (NV), Jim Renacci (OH), Judy Biggert (IL), and Al Green (TX). Bill proposes that A&A is excluded Bill passed the House Financial Services Committee unanimously Bill passed the House by voice vote Bill has not passed Senate. Projection is 40% likelihood to pass. Income from Assets Provided Exclusively for Leading Age New York 12
Assets Any asset that can be converted to cash Not personal use items Fair Market Value = face value Cash value = face value less any costs, expenses, penalties, taxes or liens that would be paid to sell the asset or would be paid when the asset was converted to cash Checking/Savings Checking Account Average balance over six months Savings Account/ Direct Express Debit Cards Current balance obtained within 120 days of certification Provided Exclusively for Leading Age New York 13
Retirement Accounts Balance in accounts is accessible Cash value is the balance less penalties and taxes Income is interest earned Regular Periodic Payments Some Assets/Retirement Accounts make regular periodic payments 401K Annuity Not ROTH Provided Exclusively for Leading Age New York 14
Monthly or Quarterly Periodic Payment Standard Payment Usually Monthly Count payment as income Do not count the cash value of the asset Do not count interest income from the asset Retirement Accounts with RMD RMD = Required Minimum Distributions Difficult when withdrawn once a year Count the one-time distribution as income Do not count the asset Do not count interest/dividend income from the asset Provided Exclusively for Leading Age New York 15
Example Resident is currently receiving SSA in the amount of $500/ month. $6000.00 per year IRA with a FMV of $300,000.00 cash value of $150,000.00 earning $ $5000.00 per year We know resident will take distribution of $10,000.00 in December but we don t know what the resident plans to do with the money AR is created SSA = $6000.00 Other Income = $10,000.00 AR Total Annual Income is $16,000.00 Home as Rental Property The home would be counted as an asset Determine the cash value of the asset by deducting from the current fair market value: (a) any unpaid balance on any loans secured by the property and (b) reasonable costs that would be incurred selling the asset Provided Exclusively for Leading Age New York 16
Rent Received The rent received would be considered income from the asset. Can count this as income from a business, if the tenant can provide some form of documentation such as a business license a tax ID or a tax return Lump Sum Payments Deferred SSA/SSI Insurance Settlements Lottery Winnings One-Time Monetary Gifts Etc. Provided Exclusively for Leading Age New York 17
Considerations If the asset is earning income, make sure the amount earned along with other increases does not increase household income by $2400 or more No IR required unless it does Count as asset on next certification if resident still has possession Assets Disposed Any amounts in excess of $1000 given away in the last 2 years Cash value of any assets sold or given away for less than current fair market value in last two years Provided Exclusively for Leading Age New York 18
Considerations Do not count assets surrendered as a result of: Divorce Court Settlement Foreclosure Bankruptcy The Medical Expense Deduction Provided Exclusively for Leading Age New York 19
Whose Expense Counts If Household is Elderly or Disabled Count out-of-pocket medical expenses for ALL family members regardless of Age Do not count live-in aide s out-of-pocket medical expenses Count the amount the resident pays the live-in aide Anticipated Medical Expenses Anticipate Medical Expenses for the Next 12 months Ask if a resident has any anticipated out-of-pocket medical expenses Resident is supposed to tell you Review certification history for any omissions Provided Exclusively for Leading Age New York 20
Recurring Medical Expenses Prescription Drugs Regular Medical Appointment/Treatment Caregivers Payments for Medical Bills Insurance Premiums Long-term care (special) Etc. See HH 4350.3 R1, C3, Exhibit 5-3 Recurring Medical Expenses Current Prescriptions Or Regular Medical Appointments Usually, the resident has no way of knowing what the costs will be Use receipts from the prior year to estimate the upcoming year s medical expenses. Payment history can be obtained through a pharmacy Some pharmacies only provide copies to the resident Provided Exclusively for Leading Age New York 21
Recurring Medical Expenses New Prescriptions Or Regular Medical Appointments Need to get an estimate of the expense See Handbook Questions and Answers Question # 87 87. Question: A tenant has provided a list of medications that he/she is prescribed to take. If the tenant has been buying some of the medications, but cannot afford to buy all of them, should the owner/agent allow the expense deductions for all of the medications on the list, if the cost can be verified by the pharmacy? Is this a situation where only the medications for which the tenant has receipts can be counted? Provided Exclusively for Leading Age New York 22
Answer # 87 Answer: The owner/agent must include all medical expenses the family anticipates to incur during the 12 months following certification/recertification that are not reimbursed by an outside source. If the tenant indicates that he/she will begin to purchase the medications during the next 12 months and the cost will not be covered by an outside source, the cost of the medications may be included in the deduction. If the tenant does not plan to purchase the medications for the next 12 months, the tenant may request an interim recertification when he/she begins purchasing the prescriptions. Paying Medical Bills Ask a resident about any medical payments that will be made in the next 12 months If a resident is paying down a bill you must include the amount the resident will pay in the next 12 months Provided Exclusively for Leading Age New York 23
One-Time Non-Recurring Not really one-time Dental Treatments Hearing Aides Glasses Unexpected treatment Kidney infection Respiratory/pulmonary treatment Surgery Non-Recurring Ask about any one-time non-recurring expenses that were not anticipated on the last certification Any out of pocket expenses that have been paid since the resident moved in, but not included on the 50059, should be included on the AR (or IR as appropriate). Proof of payment is verification of the expense Provided Exclusively for Leading Age New York 24
Making Payments When a family is making regular payments over time on a bill for a past one-time medical expense, payments are included in anticipated medical expense If a family has received a deduction for the full amount of a medical bill it is paying over time, the family cannot continue to count that bill even if the bill has not yet been paid Mileage Mileage to and from medical treatment is also included as part of the medical expense deduction Current Medical Mileage Rate 2013 24 cents per mile driven for medical purposes Provided Exclusively for Leading Age New York 25
Over-the-Counter Includes: Aspirin Testing Strips Glycoside Certain Vitamins Etc. Must be necessary to treat a specific medical condition Not for General Good Health Need must be verified by a medical practitioner licensed in the locality where practicing Personal Use Items Count expense if item is used primarily to prevent or alleviate a physical or mental defect or illness Cost of a wig to improve the mental health of a patient who has lost all of his or her hair Incontinence supplies Reading glasses Provided Exclusively for Leading Age New York 26
Insurance Medical insurance premiums or costs of an HMO are included as part of the medical expense deduction Ask about deductible Long term care premiums are included as part of the medical expense deduction Special requirements Long Term Care Insurance The family member paying a long-term care insurance premium must sign a certification that states the insurance is Guaranteed renewable, Does not provide a cash surrender value, Will not cover expenses covered under Medicare, and Restricts the use of refunds See HH 4350.3 R1, C3, Exhibit 5-4 for Sample Provided Exclusively for Leading Age New York 27
Life Line Do not include cost of Life Line, cell phones or other devices used to contact emergency support See Handbook Questions and Answers Question # 88 88. Question: Can the cost of Life Line or a cell phone recommended by a physician for a frail, elderly person to use in case of a medical emergency be counted as a medical expense? Provided Exclusively for Leading Age New York 28
Answer # 88 The cost of Life Line or a cell phone should not be considered as a medical expense. An allowable medical expense is an item that treats or alleviates a medical condition. Life Line or a cell phone do not qualify as a medical expense since neither have an impact on the actual medical condition. Assistance/Companion Animals Costs associated with Assistance and Companion Animals is included in the medical expense deduction Cost of the animal Care of the animal Vet bills Food Grooming Provided Exclusively for Leading Age New York 29
Question # 93 93. Question: Chapter 5, Paragraph 5-10 D.8.h refers to the upkeep of a service animal as a medical expense. What are some of the things that HUD considers upkeep of the service animal? Answer # 93 Items considered a part of the upkeep of a service animal include dog food, veterinary bills, required shots, license fee, and the ID tattoo on the ear. Owners must use their discretion when discerning what is considered upkeep items. Provided Exclusively for Leading Age New York 30
Household Help Cost of Household Help is generally excluded.. But not always See Handbook Questions and Answers Question # 92 92. Question: If a tenant in a wheelchair pays $20 every two weeks to enable him/her to run errands, can the amount spent be considered a medical expense? Provided Exclusively for Leading Age New York 31
Answer # 92 Household help is not a medical expense. As stated in the examples in Chapter 5, Exhibit 5-3 concerning "Household help" - it is counted as a medical expense only if it is a nursing-type service or certain maintenance, or personal care service provided for qualified long-term care Resources Handbook Q & A http://portal.hud.gov/huddoc/doc_ 20476.pdf IRS - http://www.irs.gov/publications/p502 /ar02.html#en_us_2012_publink10001 78851 Provided Exclusively for Leading Age New York 32
Verification of the Medical Expense Must Have Process What Expenses count? IRS Rule of Thumb How to Verify Receipts for 12 months Receipts for 1 quarter Receipts for 1 month Provided Exclusively for Leading Age New York 33
Question # 89 89. Question: Can the various options for calculating medical expenses be combined on one certification? When calculating medical expenses, can owners/agents choose which method to use or should the owner/agent use the past twelve months, if anticipating a tenant s medical expenses is not possible? Must the same method be used consistently or on a caseby-case basis? If using the previous twelve months and an ongoing expense stops or a new one starts, should an interim be conducted? Answer # 89 Answer: The owner/agent determines the procedure to be used to determine anticipated medical expenses based on the guidance in Chapter 5, Paragraph 5-10 D. Since this amount is an estimate, the owner should use a methodology that will provide the most accurate estimate. Whatever procedure is selected should be used consistently for all tenants. It is possible that all options would be included in the owner s procedure for determining medical expenses. Provided Exclusively for Leading Age New York 34