Averaging Income
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This section includes budgeting averaged income including educational income, contract income, support payments, foster care, subsidy payments, and self-employment.
Policy
See any of the following income types that frequently use average budgeting:
Foster Care and Adoption or Guardian Subsidies
Foster care, adoption subsidies, and guardian subsidies are paid on a monthly basis with a daily rate. The monthly average is budgeted after determining an annual gross amount from the amount received in the last 30 calendar days and dividing by 12.
Child, Medical, and Spousal Support
FAA budgets the support received in the last 30 calendar days as ongoing when it is expected to continue. When the support fluctuates from month to month, FAA averages the last 3 to 12 months to identify a true reflection of support income normally received on a monthly basis. When the support income fluctuates, there still may be unusually high or unusually low payments that can be dropped. For more information see Budgeting Support Income Example 1 and Example 2 .
Educational Income
Educational income received by participants aged 18 through 49 and enrolled at least half-time in an institution of higher education(g) is financial aid. FAA budgets countable education income by considering all of the following:
●Establishes the net countable educational income by deducting allowable expenses from the gross income. Educational expense deductions include any of the following:
Books and supplies
Mandatory educational fees
Miscellaneous educational and personal expenses
Student Dependent Care
Education Transportation
●To budget a monthly income, FAA completes all of the following:
Deducts allowable educational expenses from educational income to determine the net countable educational income.
Divides the net countable educational income by the months the income is intended to cover.
FAA does not count educational income until it is received or the participant reasonably expects to receive it.
A participant may receive unearned educational income as one or more of the following:
●A monthly amount
●An amount intended to cover several months
To average educational income, FAA completes all of the following steps:
●When the payment and the expenses are for the same months, FAA completes all of the following:
Subtracts the total expenses from the total income.
Averages any remaining income over the months it is intended to cover.
●When the income and expenses are for different months, FAA completes all of the following steps:
Divides each income by the number of months it is intended to cover.
Divides each expense by the number of months it is intended to cover.
Subtracts the total monthly expenses from the total monthly incomes.
●Includes earned, unearned, or educational expenses intended to cover more than a month.
●Begins with the month containing the first day of the intended period and extends through the month containing the last day of the intended period.
Contract Income
Contract income is budgeted by one of the following:
●Averaged over 12 months
FAA budgets contract income by averaging the gross contract income over 12 months when one or more of the following apply:
●When the contract covers 12 months.
●The participant is paid once every 12 months.
●When the contract covers less than 12 months, the participant indicates that the contract amount is their annual income.
●The contract covers a period less the 12 months, and the contract is the participant’s primary source of income.
●Received for a Specified Period
FAA averages the income over the specified period covered by a contract when all of the following apply:
●The contract covers less than 12 months.
●The contract income does not represent the participant’s annual income.
●The contract is not the participant’s primary source of income.
●The contract does not include pay on an hourly or piecework basis.
●Paid Hourly or by Piecework
When a contract includes pay on an hourly or piecework(g) basis, FAA budgets the income by completing all of the following:
●Establishes a 30-day income period.
●Converts the income based on the frequency of pay.
See Income Budgeting Basics for more information about converting income and Projecting Income for more information about budgeting a 30-day income period.
A contract is at-will employment when the employer or employee can terminate an employment relationship at any time with or without advance warning and with no subsequent liability. This does not change how the income is budgeted.
Self-Employment
When a participant does not meet the definition of self-employment(g), it is considered earned income(g). (See Wages and Salaries for income type information.)
Self-Employment Gross Profits
When the income received exceeds the business expenses, FAA considers the difference as the gross profit. (See Income Eligibility for more information about self-employment expenses and the Self-Employment Expense Deduction.)
FAA uses the gross profit as the monthly income amount to determine eligibility and benefit amount.
NOTE Self-employment income due to farming uses actual expenses and has special budgeting procedures. (See Farming for more information.)
Based on the length of time a participant’s self-employment has existed, and there are no significant changes, FAA determines self-employment income using one of the following methods:
●When the self-employment business has existed for 12 or more months, FAA divides the annual income by 12 to calculate a monthly income amount.
●When self-employment has been in operation for less than 12 months, FAA averages the monthly self-employment income received to calculate a monthly income amount. FAA excludes all of the following months from the average when a partial month of income is received:
The initial month of self-employment income
The current month
●When the self-employment business has existed for less than a month, all of the following apply:
For the new application month, the actual income received is used.
The average weekly income is converted to a monthly income for the approval period or until the participant reports an income change.
Capital Gains
Capital gains are the profits from the sale or transfer of capital assets used in a self-employment business and are included in the gross profits. Capital assets include and are not limited to, any of the following:
●Equipment
●Securities
●Real estate
●Other real property.
Self-Employment Resources
Resources necessary for self-employment are not countable when the resource is held identifiably sole and separate from other resources. For more information about self-employment resources, see Resources owned sole and separate.
Verification
The participant has the primary responsibility for providing verification. (See Participant Responsibilities – Providing Verification for additional policy.)
For NA, all of the following income is required to be verified before eligibility is determined:
●Reported on a new application, during the interview of a new application, or changes reported before the eligibility determination of a new application.
●Changes after an eligibility determination of a new application (e.g., a renewal application, mid approval contact, etc.) and any of the following apply:
The source of the income has changed.
The income is questionable(g) or unclear(g).
The reported income amount has changed by $51 or more.
The previous verification in the case file is more than 59 calendar days old.
For CA, all income is required to be verified before determining eligibility.
Legal Authorities
AAC R6-12-507 (d)(1-3)
AAC R6-12-508(B)(1-2)
7 CFR 273.10(c)(3)
7 CFR 273.11(a)(1)(i - iii)
7 U.S.C. 2014 (f)(1)(A)
last revised 10/02/2023