What Is Household Income?

Family income is almost any type of income that you, your family members, and anyone else who lives with you bring into your home. It can be earned or unearned income.

Family income can be calculated in different ways, depending on what items matter for the formulas used by a specific agency or program.

Many government programs rely on household income to determine eligibility for tax credits and benefits at both the federal and state levels. Some programs include types of income that others do not.

Definition and examples of household income

A family, and by extension its income, almost always includes spouses and their dependents. But this is a traditional home or family, and not all of them fit that mold.

The US Census Bureau includes everyone 15 years of age and older, regardless of whether they are related.1 Family income includes what everyone earns, even if they don't use their money to support the family. This may be the case for a 17-year-old who works part-time and uses the income exclusively for her own pleasure. These revenues can be included, especially at the state level.

Some states, like Vermont, include the income of spouses or civil union partners, even if they do not reside in the home, if the couple is not separated or divorced by court order.

Many families consist of only one person, with no roommates or family members residing with them. This also constitutes a family, and the median family income in the country is generally less than the median family income because these single-person households are included.

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 they earn $ 70,000 together.

Jackie and Janie live together and share their home with Jackie's brother. Their three combined income is $ 50,000.
The median income of these three families, about $ 51,667, is a little more than what the family of three contributes, but it is a little more than the individual household income of Joe or Jackie and Janie. However, they are all defined as family income.

Average household income x average household income

The "median" household income is different from the "median" household income. Half of all families have more than the country's average and half less.

An average figure is literally in the middle. Includes families with no income. Average household income figures are used most frequently by the US Census Bureau, which has revised its calculations to arrive at these figures several times over the years.

How does family income work?

Family income determines eligibility for insurance through the Health Insurance Marketplace, financial assistance programs, and some tax benefits. The rules for defining family income may vary between entities and programs.

The health insurance market

Purchasing health insurance through the Health Insurance Marketplace requires you to calculate your household income for the upcoming year, including all family members, including those who don't need coverage. You cannot use last year's income. This marketplace determines your eligibility using Modified Adjusted Gross Income (MAGI), which is effectively your taxable income with certain added tax deductions.

The U.S. Census Bureau

The Census Bureau uses family income data to establish poverty status and guidelines for a variety of federal purposes. It also determines the country's poverty rate for legislative and documentation purposes.

The Census Bureau does not include the income of family members who lived in the home at some point in the past year but were no longer residing there at the time the household data was collected. Includes income from people who did not live in the household during the previous year, but who literally may have moved on the day of the interview.

The Census Bureau uses pre-tax income figures, that is, the gross profit before you start claiming various tax deductions. It includes all members of the family over 15 years of age, regardless of whether there is any relationship.

Federal Prescription

The IRS uses each family member's MAGI to determine eligibility for the premium tax credit, but only if the party is required to file a tax return by law. This depends on the income limits, so those who earn very little are usually exempt.

 

We hope you enjoy watching this video about What Is Household Income?

Source: tutor2u

 

Did you find this post useful or inspiring? Save THIS PIN to your Finances Board on Pinterest! 😊

Ok, That is all for now…

If you enjoyed this article please, Share and Like it. Thanks.

See you in the next post, Have a Wonderful Day!