Figuring out your total household income is an important part of financial planning and applying for various social services and government programs But calculating household income can be tricky with multiple earners, various sources of income, and tax considerations This comprehensive guide will walk you through the key steps for tallying up your total household income accurately.
Why Calculating Household Income Matters
Knowing your accurate household income is crucial when
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Applying for loans or mortgages – Lenders will require your full household income details to determine if you qualify and what rates you’ll pay.
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Signing up for government benefits – Programs like Medicaid, CHIP, and Obamacare marketplace plans require accurate income details for every member of your household to determine your eligibility and savings amounts.
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Budgeting and financial planning – Understanding your full income picture is key for effectively budgeting, saving, and managing your overall finances.
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Filing taxes properly – You’ll need your household income amounts to claim dependents, applicable deductions and credits, and avoid raising red flags with the IRS.
So carefully calculating your total household income is a foundational money step for individuals and families. Here’s how to do it right.
Who to Include in Household Income
The first step is determining who to include when calculating your total household income. Be sure to include:
- Yourself
- Your spouse or partner
- Your children under 19 living at home
- Relatives claimed as dependents on your tax return
Note: Include income for dependents even if they don’t need health coverage themselves. Some government program savings are based on total household income.
Do not include:
- Children over 19 (even if living at home)
- Roommates and non-dependent relatives
Types of Income to Factor In
Once you’ve determined your household members, the next step is tallying up all applicable sources of income for each person, including:
- Employment wages/salaries
- Self-employment income
- Investment and interest income
- Retirement income like pensions and Social Security
- Alimony and child support
- Rental income
- Unemployment benefits
- Disability income
- Any other taxable income
Key tip: Use gross income amounts before any taxes or deductions are taken out for things like health insurance premiums or 401k contributions.
How to Calculate Income for Each Source
Now let’s walk through how to calculate the specific income amounts from the major sources:
Employment Income
Gather pay stubs and add up gross wages and salaries for every working member of the household. Be sure to multiply hourly wages by average hours worked per week and average number of working weeks per year.
For salaried workers, multiply the annual salary by the percentage of the year expected to work.
Self-Employment Income
Total up all business revenues, then subtract allowable business expenses. Refer to Schedule C on your past tax return for guidance.
Investment Income
Add up total amounts for interest, dividends, capital gains distributions and any other investment income. Refer to your investment statements for totals.
Retirement Income
Include the gross amounts (before any deductions) for Social Security retirement benefits, pension payments, and any withdrawals from IRAs or 401ks.
Other Income
Use total gross amounts for all other applicable income like unemployment, disability, alimony, child support, and rental income. Refer to associated documents like benefit statements.
Adjustments to Make
Once you’ve compiled all the income data, there are a few adjustments to make:
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Add back any pre-tax deductions from paychecks for things like health insurance premiums and retirement contributions.
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Factor in expected raises and changes in freelance/seasonal work for the coming year.
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Consider loss of income from a household member retiring or becoming unemployed.
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Account for any new income sources expected in the coming year.
These adjustments help provide the most accurate estimate of household income for the year ahead.
Tools to Help Calculate
For a quick and easy household income calculation, take advantage of online tools like Bankrate’s household income calculator or the income estimator on Healthcare.gov.
These tools walk you through the key steps and perform the income math automatically based on the details you input.
How to Document and Report
Be sure to keep documentation on all household income sources, adjustments, and calculations. This includes:
- Pay stubs
- Prior year tax returns
- Bank and investment statements
- Business income and expense records
- Benefit award letters
You’ll need to provide this paperwork when applying for health insurance, government benefits, loans, and other programs that consider household income.
Accurately reporting your total household income is also crucial for filing your annual tax return properly and avoiding issues with the IRS.
Changes to Report
If your household income changes substantially during the year, be sure to report the updates when required. Examples include:
- Gaining or losing a household member
- Starting a new job or becoming unemployed
- Major changes in work hours or seasonal income
- Large market gains or losses impacting investment income
Failing to report mid-year income changes to applicable government programs could negatively impact your eligibility and savings.
Take the Time to Calculate Carefully
While it takes effort to thoroughly calculate household income, the benefits are well worth it. Accurately understanding your full income picture empowers you to make the best financial decisions and gain access to money-saving government resources. Use this comprehensive guide to walk through the key steps and calculations required.
Household Income and Unit AMI
Affordable housing buildings have homes with different rent levels. The chart below gives an overview of rent levels and maximum household income levels at six different affordability levels. You can use it to determine if you might qualify for one of our available apartments. A more thorough calculation will be completed with the site manager in person at the time that an application for a specific apartment is made.
For all affordable housing described on this website, eligibility is partially based on your household income. Different types of affordable housing will have different income limits depending on the size of the apartment. For you to be eligible to sign a lease, your household income cannot exceed those limits. All of our properties use a similar process for measuring your income. Your income is calculated and compared as a percentage of the median household income in King County for a household of your size. This tells us what level of eligibility you are in.
Area Median Income (AMI) is the midpoint of a region’s income distribution- half of the families in a region earn more than the median and half earn less than the median. All of our properties’ income levels are tied to the King County AMI.
On our website, Unit Area Median Income (Unit AMI) is the limit that determines the maximum allowable income of a certain apartment. You will find it listed for each apartment vacancy along with a Maximum Allowable Income pop-up chart in Search Available Apartments.
Calculate your household income and your likely Unit AMI category per the King County Median Income with these steps:
- Step One: Total Annual Income
Add the gross yearly income for each person in your household to determine your household’s total annual income. This number should combine the annual wages and salaries, assets, and other sources of income.
- Step Two: Number of People in Household
Using the chart below, move your finger vertically along the left-most column and find the number of people living in your home.
- Step Three: Unit AMI Percent
Next, move your finger horizontally in the row for your household’s size. Find the first annual income value that is greater than your household’s total annual income. You may qualify for the Unit AMI percent at that level and greater.
See the example below.
How do you determine household income?
How do you calculate household income?
Because household income is the total sum of all gross income, the final step is to add all the annual income together. This will give you the total annual household income. Let’s say that five people are living in a home: a husband and wife, the husband’s mother, a 16-year old and a 14-year old.
What is household income?
Household income is one of three types of measures of wealth — the other two are family income and per capita income. Household income is defined as the total gross income before taxes, received within a 12-month period by all members of a household above a specified age. The Census Bureau notes this threshold as 15 and older.
How do you calculate income tax?
It is usually calculated as a gross amount rather than net figure, before deducting taxes or with holdings. To calculate it, total the gross earnings of each person living in the home who is 15 years old or older. The father earns $ 5,000 per month. The mother earns $ 7,000 per month. Their son earns $ 2,000 per month.
How do you calculate annual income?
To determine the annual income, you may need to multiply your monthly gross income by 12. For example, if you know that you bring in $1,000 per month in alimony payments, you need to multiply that by 12 and include it as $12,000 per year in annual gross income.
