How to Calculate Poverty Threshold
The poverty threshold--the 1963-1964 brainchild of Mollie Orshansky, then of the Social Security Administration--determines which households have insufficient funds to meet basic needs. The calculation uses total household income--not including capital gains or losses or noncash benefits like food stamps and other federal entitlements. Though the federal government determines this threshold, you can use the standard to calculate how your income differs from the poverty line.
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Instructions
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On the Web
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1
Go to www.census.gov/hhes/www/poverty/threshld.html. The U.S. Census Bureau annually updates poverty thresholds so you can determine your household's status.
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Click a link for the previous year, since the current year’s data will not yet be on the site. For instance, if the current year is 2010, click on 2009.
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Check the chart for your household size. Household sizes listed range from one person to eight or more. If you live alone and earn $18,000 annually, for instance, you are not in poverty, according to the 2009 poverty threshold. That year's threshold requires a person younger than 65 to earn less than $11,161 before she can claim poverty.
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Calculate the difference in dollars between your household’s income and the current poverty threshold. Subtract your annual pretax income from the previous year's poverty threshold. If the result is positive, you have an income deficit (and qualify for poverty status). If it is negative, your income is above the poverty level.
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Tips & Warnings
Each applicable household is assigned to one of 48 poverty thresholds; these categories vary by household size and members’ ages, according to the bureau. Thresholds are updated annually to account for inflation.
Orshansky, in developing the poverty threshold, used a household's food costs -- under the U.S. Department of Agriculture’s economy food plan for families of three or more -- and multiplied the dollar amounts by three, according to the U.S. Department of Health and Human Services. She used different calculations for one- and two-person- households due to the likely fewer fixed costs associated with smaller households.
Orshansky used the factor three because a 1955 federal survey found that households of more than three spent about one-third of their post-tax income on food, according to the department.
The U.S. Office of Economic Opportunity adopted Orshansky’s poverty thresholds in 1965, according to the department. However, poverty threshold today only calculates income before taxes are taken out, according to the bureau.
