Definition of Annual Household Income
Organizations routinely gather statistical data about the United States population. One figure that researchers collect is annual household income. This figure is of interest to those studying the economy because it is a general indicator of how households are faring financially, although it doesn't indicate how debts impact the monies a household gathers through the year.
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General Definition
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Annual household income is the amount of monies gathered by all members of a household for a period of twelve months. Typically, monies gathered by minors under age 16 are not included in annual household income because of labor laws that limit employment of minors.
Inclusions
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Definitions of annual household income start to vary when organizations determine what monies to count as income. For example, a definition of annual household income from the Bureau of Justice Statistics includes "wages, salaries, net income from businesses or farms, pensions, interest, dividends, rent, and any other of monetary income." The Minnesota Department of Revenue defines annual household income as including the federal adjusted gross income plus nontaxable income like welfare benefits.
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Adjusted Versus Non-Adjusted
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When organizations work with annual household income, they separate incomes into adjusted and non-adjusted categories. Adjusted calculations may subtract or add figures, such as deductions for moving, paying alimony or having a baby. Non-adjusted annual household income is the figure you have before these modifications. There thus are two definitions of annual household income in use at any one time.
Variability
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Annual household income is highly variable because people change or lose jobs, every household has a different number of members and family members may leave or return to a home. It is for this reason that organizations and economists have to define annual household income in fairly general terms. Because of the variability of annual household income, it sometimes is more useful to apply a working definition across a period of years to recognize overall economic trends.
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References
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