Gambling Income and Assets

Applicants and residents are required to report all income received and assets owned by all members of the household to accurately determine income at initial and annual recertification. This includes recurring and non-recurring income. To accurately determine income for households, this may include income from gambling.

To determine if gambling income should be considered as income, it is important to understand the definition of Annual Income and what is considered Non-Recurring Income.

• ANNUAL INCOME: As defined by HUD, 24 CFR 5.609(a), Annual Income includes all amounts, not specifically excluded, that is received from all sources by each member of the family 18 years or older, or is the head of household or spouse of the head of household; plus unearned income by or on behalf of each dependent who is under 18 years of age; and, actual income from assets or imputed returns on net family assets exceeding the annual threshold when the value of the actual returns from a given asset cannot be calculated. Imputed returns are based on the current passbook rate, as determined by HUD.
• NON-RECURRING INCOME: As defined by HUD, 24 CFR 5.609(b)(24), Non-Recurring income is income that will not be repeated in the coming year based on information provided by the family. Income received as an independent contractor, day laborer, or seasonal worker is not excluded from income under this paragraph, even if the source, date, or amount of the income varies.

In addition, the Low-Income Housing Tax Credit Agencies Report of Noncompliance Audit Technique Guide states that we count the gross income (with no adjustments or deductions) the household anticipates it will receive in the 12-month period following the effective date of the household’s certification of income. If the household reports fluctuating income, income may be determined based on actual income received or earned within the last twelve months before the determination.

Current regulations do not directly speak to gambling; however, they do speak to lottery or contest winnings, which are considered types of gambling, stating these would be considered lump sum additions to net family assets and are not treated as income. Even though the regulations do not directly address recurring winnings as income, if these types of winnings are repeated during the year, they would be considered income and do need to be counted as such.

Some examples are as follows:

1. Mary visits a casino in Atlantic City and wins $2,500. Mary reports her winnings at Recertification and states she hasn’t been to a casino since this visit and has no intention of returning to the casino in the next 12 months. The manager determines that the winnings are a one-time, lump-sum addition to net family assets and would not be included in annual income.
2. At Mary’s next annual reexamination, the manager determines that Mary did visit some casinos during the past year and won an additional $3,800. Again, Mary certified that she does not intend for this to continue; however, since a pattern has now been established, the $3,800 should be counted as annual income because it is now repeated income.

Keep in mind, gambling losses are not subtracted from gambling winnings. Regulations clearly state that all income BEFORE deductions, this would include gambling losses, must be counted as income.

It is recommended when calculating income eligibility, and to be consistent with all your properties, management should establish a policy for determining income and assets when it comes to gambling and lottery/contest winnings. Things you may want to consider in your policy would be as follows:

WHEN WILL WININGS BE CONSIDERED INCOME: While most winnings are non-recurring, the following will be evaluated: If winnings have repeatedly occurred in the past 12 months, they will be treated as income rather than assets. Be sure to clarify and explain what is considered repeated.

When a household has gambling income, management should require a set number of documents (e.g., two months statements from the gambling organization or bank statements) for calculating the yearly income. Be clear that management may request additional statements or information to determine income or clarify the information provided if the situation warrants.

WHEN WINNINGS WILL BE CONSIDERED ASSETS: FanDuel, DraftKings, and other online wagering platforms allow participants to maintain a cash balance within their user account. At the time of certification or recertification, any balance available in such accounts must be treated as an asset, similar to Cash App. The amount verified as of the certification effective date is included in the household’s total assets.

NON-RECURRING WINNINGS AS A LUMP SUM ASSET: Gambling proceeds that are not anticipated to recur are treated as a lump sum asset, consistent with HUD guidance on lottery winnings. These would only be considered assets only as long as the household retains them. Most individuals place these winnings in an asset type account (i.e., savings or Cash App); in this event, the lump sum amount is counted in the total cash value of the asset account. Any amount not placed in a specified bank account would be considered an asset and would most likely be considered “cash on hand.”

DOCUMENTATION

It is important to document all assets following your management company’s procedures. These may include a Self-Declaration if under the asset threshold; or, a Gambling Account Transaction Log, if above the asset threshold.

Verifying gambling income can be tricky, but not impossible. To verify gambling winnings, follow your management company’s procedures. You may want to consider having the tenant/applicant provide the following: a Transaction Log showing deposits and winnings and project winnings based on year-to-date amounts. If an individual gives a valid reason for not being able to obtain the transaction log, management should decide how they are going to verify income. Remember, screenshots should not be allowed as an acceptable means to verify income or assets. It is suggested the management company set a specific number of bank statements (current and consecutive) that show the gambling deposits and annualize this amount.

Creating and maintaining affordable housing communities is a complex task. Numerous state and federal requirements must be followed – both during development and for years thereafter. MLCM clarifies LIHTC, Federal HOME, HUD, and certification requirements you must follow to remain compliant. For more information on these services, don’t hesitate to contact us.

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