Once you’ve figured out whether or not a family member qualifies for the earned income disallowance (EID), the next steps are to figure out the amount that is to be excluded. Calculating the EID is not as simple as just excluding all of the family member’s earned income. The regulations require that you exclude what’s called the incremental increase.
Essentially, this means that you're making a before-and-after comparison. You look at the EID family member’s income before they qualified for EID (which is called the baseline) and compare it to their income after they qualified for EID, excluding the difference. Typically, PHAs use the income from the family member’s most recent 50058, although this is a policy decision in the administrative plan or the ACOP rather than a HUD regulation.
The first thing to remember when calculating the exclusion is that the income comparison is only for the individual family member’s earnings, not the income of the entire family. EID is an individual exclusion.
EXAMPLE: Bob and Wanda live in a public housing unit. Wanda has been working and earning $15,000 a year. Bob has not been working but has been collecting veteran’s benefits in the amount of $12,000 a year. Bob then gets a job earning $22,000 a year and his veteran’s benefits stop.
Assuming he qualifies for EID, we would compare Bob’s $12,000 in veteran’s benefits to his new earnings of $22,000. We would not consider Wanda’s income when calculating Bob’s exclusion. Bob’s exclusion would be $10,000. We’d count all of Wanda’s income.
Another important thing to remember when calculating the exclusion is that the EID family member’s baseline never changes. Using the example above, regardless of any changes in income, Bob’s baseline will always be $12,000. He may experience increases or decreases in either his earned or unearned income during his time on EID, but that will not affect his baseline. The PHA will compare whatever his current earned income is to his baseline of $12,000.
EXAMPLE: Bob works at his job for six months and is then loses his job. He goes on unemployment and receives $13,000 per year. Several months later, Bob gets a new job earning $23,000 per year. Bob’s baseline remains $12,000. The PHA compares $12,000 to his current income of $23,000 and (assuming he is still in the full exclusion period) excludes $11,000.
Finally, when calculating the exclusion, it’s important to remember that EID only applies to increases in earned income. Using the example above, when Bob loses his job and goes on unemployment, all of his unemployment income is counted because it is unearned income. Bob will actually experience an increase in his rent as a result of going on unemployment.
EID does not protect the family from increases in rent due to increases in unearned income. When Bob gets his new job and goes back on EID, his rent will decrease. This can be difficult for families to understand since they are used to an income-based rent system where increases in income result in increases in rent, and decreases in income result in decreases in rent.
Trainer and consultant Samantha Sowards has been a part of the NMA team since 2008. For beginning and intermediate students, she recommends HCV and Public Housing Rent Calculation, available in both English and Spanish. Class attendees receive a free NMA Earned Income Disallowance (EID) kit on CD. The kit provides staff with simplified methods to accurately qualify families, calculate the exclusion amount correctly, and track throughout the up-to-48-month qualifying period. Easy computer installation allows staff to view instructions on their computer screens or print for reference.