Rural Development compliance myths

Myth 1: When RD is combined with Tax Credits, RD student rules can be used to satisfy Tax Credit student requirements (or the other way around).

This is a very common and VERY dangerous myth. The student rules for tax credits apply to full-time students of any age. RD student requirements focus on full OR part-time ADULT students at institutes of higher learning thr

ough age 23. The student rules for both of these programs can be complex and it is crucial if you have an RD/Tax Credit unit that you fully understand both sets of rules. A household applying for this type of unit will need to meet both the RD and Tax Credit student requirements.

Myth 2:  Rent is always based on 30% of adjusted income for units with rental assistance.

Not always! The tenant rent is determined by the greater of 30 percent of adjusted income or 10 percent of gross. While not as common, in some scenarios 10 percent of gross income can be greater than 30 percent of adjusted income if the household has extensive expenses and deductions. With the great advances of technology, many managers use software that does this calculation "behind the scenes” when generating the 3506-8 certification. Therefore managers are often unaware of exactly how the rent calculation was computed.

Sam’s gross income is $30,000. Both Sam and his dependent daughter are disabled. He and his daughter have $20,600 combined in allowable medical and disability assistance expenses. These expenses, his elderly deduction and dependent deduction bring Sam’s adjusted income to $5,000. Rent based on 10 percent of gross rent is the higher rent.

Rent based on gross income:  $30,000 ÷ 12 X 10% = $250
Rent based on adjusted income: $8,120 ÷ 12 X 30% = $203

Myth 3: When selecting applicants from a waitlist, applicant selection is based on time and date with priority given to the household with the lowest income.  

RD tells us that selection from the waiting list will be made according to date and time and prioritized based on the household income level, not the actual income of the household.

Very-Low Income limit = $20,000     Low Income Limit is $26,000

Household A applies on 1/10/2013. Their income is $23,000

Household B applies on 1/12/2013. Their income is $18,000

Household C applies on 1/14/2013. Their income is $15,000

The next unit should be offered to Household B, since household B is the first VERY-LOW income applicant that applied. Priority is based on the income level, not the lowest income.

Don’t find yourself believing a myth! Get the facts about RD at one of the upcoming AHAIN sponsored trainings! Check out the AHAIN event calendar for upcoming training dates and location.

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