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Income (Alternate Definitions)

Last Updated: Mar 09, 2016 09:00PM PST
Income is a concept which we all think that we understand, but users should be aware that many different definitions of income are possible.   AGS utilizes the Census Bureau definition, which is conservative in its scope as it tends to include "imputed" items (imputed meaning that the items may not actually represent any monetary exchange).   Here are the variations of income as explained by the Census Bureau:

Alternative Measures of Income Definitions

The 15 definitions of income shown below are included in the Census Bureau's "Alternative Measures of Income":

  1. Money income excluding capital gains before taxes. This is the official definition used in Census Bureau reports.

    a.Money income after taxes (without earned income credit (EIC)). This is definition 1 minus federal and state income taxes exclusive of the EIC, minus payroll taxes, plus capital gains, and minus capital losses.1

    b.Money income after taxes (including EIC). This is definition 1a plus the federal and state EIC. (See definition 7.)

  2. Definition 1 less government cash transfers. Government cash transfers include nonmeans-tested transfers such as social security payments, unemployment compensation, and government educational assistance(e.g., Pell Grants), as well as means-tested transfers such as aid to families with dependent children (AFDC, ADC), temporary assistance to needy families (TANF), and supplemental security income (SSI). (For a complete listing of transfer income, see definitions 9 and 12.)
  3. Definition 2 plus capital gains. Realized capital gains and losses are simulated as part of the Census Bureau's federal individual income tax estimation procedure.
  4. Definition 3 plus imputed health insurance supplements to wage or salary income. Employer-paid health insurance coverage is treated as part of total worker compensation.
  5. Definition 4 less payroll taxes. Payroll taxes are payments for social security old age, survivors, and disability insurance, and for hospital insurance (medicare).
  6. Definition 5 less federal income taxes. Definition 7 shows the effect of the earned income credit (targeted to low-income workers) separately.
  7. Definition 6 plus the earned income credit. Includes federal EIC and EIC for nine states (Iowa, Kansas, Massachusetts, Maryland, New York, Oregon, Rhode Island, Vermont, and Wisconsin) that use federal eligibility rules to compute the state credit as a percentage of the federal EIC.
  8. Definition 7 less state income taxes.
  9. Definition 8 plus nonmeans-tested government cash transfers. Nonmeans-tested government cash transfers include social security payments, unemployment compensation, workers' compensation, nonmeans-tested veterans' payments, U.S. railroad retirement, Black lung payments, Pell Grants, and other government educational assistance. (Pell Grants are income-tested but are included here because they are very different from the assistance programs included in the means-tested category.)
  10. Definition 9 plus the value of medicare. Medicare is counted at its fungible value.2
  11. Definition 10 plus the value of regular-price school lunches.
  12. Definition 11 plus means-tested government cash transfers. Means-tested government cash transfers include AFDC, ADC, TANF, SSI, other public assistance programs, and means-tested veterans' payments.
  13. Definition 12 plus the value of medicaid. This definition counts medicaid at its fungible value.
  14. Definition 13 plus the value of other means-tested government noncash transfers, including food stamps, rent subsidies, and free and reduced-price school lunches.

    a. Definition 14 less medical programs. This is cash income plus all noncash income except imputed income from own home, minus the fungible values of medicaid and medicare.

  15. Definition 14 plus net imputed return on equity in one's own home. This definition includes the estimated annual benefit of converting one's home equity into an annuity, net of property taxes.


  1. Data on capital gains or losses are net gains or losses from sales of capital assets as reported to the Internal Revenue Service on Schedule D.
  2. The fungible approach for valuing medical coverage assigns income to the extent that having the insurance would free up resources that would have been spent on medical care. The estimated fungible value depends on family income, the cost of food and housing needs, and the market value of the medical benefits. If family income is not sufficient to cover the family's basic food and housing requirements, the fungible value methodology treats medicare and medicaid as having no income value. If family income exceeds the cost of food and housing requirements, the fungible value of medicare and medicaid is equal to the amount which exceeds the value assigned for food and housing requirements (up to the amount of the market value of an equivalent insurance policy (total cost divided by the number of participants in each risk class).

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