Computing Disposable Income

 

Combined disposable income is defined in statute (RCW 84.36.383) and is used to determine eligibility for all of the property tax relief programs for senior citizens and disabled persons and for the deferral program for homeowners with limited income. The exemption, senior citizen deferral, and limited income deferral programs all use the same income calculation.

 

The disposable income you receive during the assessment year – the year prior to when the property taxes are due – determines your eligibility.  Example:  You are filing a tax year 2017 application – you must use your 2016 income to qualify.  You are required to include your income, your spouse or domestic partner's income, and the income of any co-tenant.  A co-tenant is someone that has ownership interest and resides in the home with you.

 

The starting point to determine your disposable income is Adjusted Gross Income (AGI) as defined by the Internal Revenue Service.  If you file an IRS tax return with the internal Revenue Service, you AGI can be found on the last line of page one of the Form 1040.

 

In the laws and rules, disposable income is defined as "adjusted gross income" as defined by the Internal Revenue Service, PLUS the following items to the extent they were not included in, or were deducted from, income used to determine adjusted gross income:

• Capital Gains (except the capital gain resulting from the sale of a primary residence if the gain was re-invested in a replacement primary residence prior to the sale or within the same calendar year as the sale)

• Amounts deducted for losses (including capital losses and penalties on early withdrawal of savings) You may not offset any gains with losses.

• Depreciation

• Pension and annuity receipts

• Military pay and benefits (except attendant-care and medical-aid payments)

• Veterans benefits (except attendant-care and medical-aid payments, and disability compensation and dependency and indemnity compensation - DIC)

• Social Security and railroad retirement benefits

• Dividends

• Interest on state and municipal bonds

Note: If a person lives in the home but does not have any ownership interest, you must still include any amounts they contribute to the running of the household – as this is considered rental income to you.

 

To determine combined disposable income, you may deduct from this amount the following items for the applicant, their spouse or domestic partner:

• Medicare insurance premiums paid under Title XVIII of the Medicare Insurance Act.

• Non-reimbursed costs for prescription drugs.

• Non-reimbursed costs for nursing home, assisted living, or licensed adult family home.

• Costs for care or treatment received in the home.

 

If there was a change in your income prior to November 1 that is expected to last indefinitely, you may estimate your income.  Multiply your new average monthly income by 12.