USDA Loan Guidelines – Adjusted annual income
1980.348 Adjusted annual income
(a) A deduction of $480 for each member of the family residing in the household, other than the applicant, spouse, or co-applicant, who is:
(1) Under 18 years of age;
(2) Eighteen years of age or older and is disabled as defined in §1980.302(a) of this subpart; or
(3) A full-time student aged 18 or older.
(b) A deduction of $400 for any elderly family as defined in §1980.302(a) of this subpart.
(c) A deduction for the care of minors 12 years of age or under, to the extent necessary to enable a member of the applicant/borrower’s family to be gainfully employed or to further his or her education. The deduction will be based only on monies reasonably anticipated to be paid for care services and, if caused by employment, must not exceed the amount of income received from such employment. Payments for these services may not be made to persons whom the applicant/borrower is entitled to claim as dependents for income tax purposes. Full justification for such deduction must be recorded in detail in the loan docket.
(d) A deduction of the amount by which the aggregate of the following expenses of the household exceeds 3 percent of gross annual income:
(1) Medical expenses for any elderly family (as defined in §1980.302(a) of this subpart). This includes medical expenses for any household member the applicant/borrower anticipates incurring over the ensuing 12 months and which are not covered by insurance (e.g., dental expenses, prescription medicines, medical insurance premiums, eyeglasses, hearing aids and batteries, home nursing care, monthly payments on accumulated major medical bills, and full-time nursing or institutional care which cannot be provided in the home for a member of the household); and
(2) Reasonable attendant care and auxiliary apparatus expenses for each disabled member of any household to the extent necessary to enable any member of such household (including such disabled member) to be employed.
More Information on USDA Loans, and USDA Frequently Asked Questions