Household Income: What It Is and How to Calculate It

Definition

Household income is the combined annual income of all people living together in the same household. It’s a common measure of a household’s earning power and is used by governments and organizations to assess economic conditions and determine eligibility for benefits.

What counts as household income

Household income can include many types of earnings, such as:
* Wages and salaries
* Self‑employment income
* Rental income
* Investment income and capital gains
* Social Security and pension benefits
* Unemployment compensation

What gets counted depends on the context or program. Different agencies apply different rules about which household members and income types to include or exclude.

Common program variations

• U.S. Census Bureau: Generally excludes earnings of household members under age 15.
• Internal Revenue Service (IRS): May exclude dependents whose earnings are below the tax‑filing threshold.
• Affordable Care Act (ACA) / Health Insurance Marketplace: Defines household to include you, your spouse, and your tax dependents (even if they don’t need coverage). Counts wages, Social Security, rent, and unemployment; excludes child support, gifts, veteran’s disability payments, and alimony for divorces finalized on or after January 1, 2019. You can use the HealthCare.gov calculator to estimate subsidy eligibility.
• SNAP/CalFresh: Household definitions and age rules differ by state; for example, California may count household members under 22 who live with and share meals with parents.
• Self‑employment: Some programs allow a standard deduction (commonly 40% of business income) instead of itemizing business expenses when calculating contributable self‑employment earnings.

Example

Jordan earns $90,000; Taylor (spouse) has $50,000 in self‑employment income; they receive $10,000 in rental income; their 14‑year‑old child earns $5,000 babysitting.

• For the Census (excludes under‑15): household income = $90,000 + $50,000 + $10,000 = $150,000
• For a program that counts dependents under 22 (e.g., CalFresh in California): household income = $90,000 + $50,000 + $10,000 + $5,000 = $155,000

Average vs. Median

• Average (mean) household income: total income of all households divided by number of households. It is sensitive to very high or very low values and can be skewed by outliers.
• Median household income: the middle value—half of households earn more, half earn less. The median is generally a better measure of a “typical” household because it is not affected by extreme outliers.

Key numbers (2023, U.S.):
Median household income: $80,610
Average household income: $114,500
* Putting you in the top 10% of U.S. households requires a minimum household income of about $234,900

Frequently asked questions

Q: What’s the difference between personal (individual) income and household income?
A: Personal income is the earnings of one person; household income is the combined earnings of all people living in the same household.

Q: Do roommates count in household income?
A: For broad economic statistics, yes. For benefit programs (like the ACA), household composition is usually limited to you, your spouse, and your tax dependents—so roommates often aren’t included.

Q: Are benefits included in household income?
A: Many benefits (Social Security, pensions, unemployment) are typically included. Some payments—like child support, certain veterans’ disability payments, and gifts—are excluded under some program rules.

Takeaways

• Household income is a key metric for assessing financial well‑being and program eligibility, but definitions vary by agency and purpose.
• When applying for assistance or comparing incomes, check the specific rules for the program or dataset you’re using.
• Use median household income rather than the average to get a clearer picture of a typical household’s earnings.