What Is Household Income?

What Is Household Income?

Household income is the total amount of income earned by all individuals living under the same roof. It generally refers to the annual gross income of all household members combined. This can include earnings from all sources, such as wages, self-employment income, investment income, and benefits like Social Security. However, calculations of household income may vary. For example, the U.S. Census Bureau doesn’t count earnings from individuals younger than 15 years old, while the Internal Revenue Service (IRS) disregards income from dependents whose earnings are below the tax filing threshold.

Key Takeaways

Household income is a comprehensive measure of your household’s annual earning power, but its calculation can vary depending on the context. Government agencies use household income to track economic trends, measure wealth, and compare standards of living. Individuals typically use their household income to apply for financial assistance or compare their financial standing to that of their peers. Median household income is often a more accurate benchmark than average household income due to the impact of extreme outliers.

How Household Income Works

Household income typically serves as a comprehensive measure of the financial resources your household generates in a year. Agencies may track it to analyze economic trends, but individuals most often use it when applying for financial assistance or comparing their finances to those of their peers. It may include, but is not limited to, wages, self-employment income, rental income, investment income, capital gains, Social Security benefits, pension income, and unemployment compensation.

That said, what counts as household income often depends on the context. In some circumstances, you may need to exclude certain household members or types of income. For example, the Affordable Care Act (ACA) determines your eligibility for health insurance subsidies using household income. It defines your household as yourself, your spouse, and your tax dependents, including those who don’t need health coverage. It includes earnings from wages, Social Security, rents, and unemployment compensation. However, it excludes earnings from child support, gifts, veteran’s disability payments, and alimony for divorces finalized on or after January 1, 2019.

You can use this HealthCare.gov calculator to check whether you’re likely to qualify for ACA premium tax credits based on your household income. CalFresh, California’s version of the Supplemental Nutrition Assistance Program (SNAP), also has specific guidelines for calculating gross household income when determining eligibility for the program. Generally, your household only includes the individuals who live, purchase food, and prepare meals together, though spouses and most children under 22 qualify regardless of whether they meet this requirement. Additionally, when calculating self-employment earnings to include in your household income, you have the option to take a deduction equal to 40% of your business income instead of claiming your actual business expenses.

Example of Household Income

Let’s imagine a household with several different income sources and explore how its household income could vary depending on the context. Jordan earns a $90,000 salary, while their spouse, Taylor, makes $50,000 annually through self-employment. They also receive $10,000 in yearly rental income from a property they own, and their 14-year-old child, Mia, collects $5,000 each summer through babysitting.

The U.S. Census Bureau only includes earnings from household members 15 years or older, so Mia’s income is excluded. For Census purposes, their household income would be: $90,000 (Jordan) + $50,000 (Taylor) + $10,000 (rental) = $150,000. In contrast, CalFresh counts income from household members under age 22 who live with their parents. Mia qualifies, so their household income for California SNAP purposes would be: $90,000 (Jordan) + $50,000 (Taylor) + $10,000 (rental) + $5,000 (Mia) = $155,000.

Average Household Income vs. Median Household Income

When comparing your household income to that of your peers, average household income and median household income are two of the most popular benchmarks. To calculate average household income, you add up all household incomes and divide by the number of households. However, even a few extremely high or low incomes can skew the results, making it less reflective of what most households actually earn.

In contrast, median household income represents the middle value in a range of household incomes—half of the households earn more, and half earn less. As a result, outliers don’t have an effect on the median, so it tends to be a more accurate representation of a typical household’s financial situation. A minimum household income of $234,900 would put you in the top 10% of U.S. earners as of 2023 (the most recent U.S. Census data available).

Real Median Household Income by State

Here’s the median household income by state, according to the most recent Federal Reserve Bank data. For the United States overall, it's $80,610. In Alabama, it's $60,660; Alaska, $98,190; Arizona, $82,660; Arkansas, $63,250; California, $89,870; Colorado, $96,640; Connecticut, $92,240; Delaware, $86,340; District of Columbia, $111,000; Florida, $72,200; Georgia, $72,420; Hawaii, $97,360; Idaho, $73,910; Illinois, $87,820; Indiana, $76,910; Iowa, $80,860; Kansas, $84,830; Kentucky, $61,980; Louisiana, $57,650; Maine, $75,740; Maryland, $102,000; Massachusetts, $106,500; Michigan, $76,960; Minnesota, $90,340; Mississippi, $55,060; Missouri, $78,290; Montana, $79,220; Nebraska, $89,190; Nevada, $81,310; New Hampshire, $98,780; New Jersey, $91,590; New Mexico, $60,980; New York, $81,600; North Carolina, $68,610; North Dakota, $76,960; Ohio, $73,770; Oklahoma, $67,330; Oregon, $88,740; Pennsylvania, $79,820; Rhode Island, $81,860; South Carolina, $69,100; South Dakota, $81,740; Tennessee, $72,700; Texas, $79,060; Utah, $101,200; Vermont, $85,190; Virginia, $96,490; Washington, $93,440; West Virginia, $60,410; Wisconsin, $79,690; Wyoming, $77,200.

What’s the Difference Between Personal and Household Income?

Personal income, also known as individual income, refers to the total earnings of a single individual, while household income generally includes the combined earnings of all individuals living in the same household.

Does Household Income Include Roommates?

Household income may include roommates for the purposes of broad economic analysis, but you typically don’t include them when reporting it for financial assistance. For example, for ACA purposes, your household only includes yourself, your spouse, and your tax dependents.

What Is the Median Household Income in the United States?

The median household income in the United States was $80,610 in 2023.

What Is the Average Household Income in the United States?

The average household income in the United States was $114,500 in 2023.

The Bottom Line

Household income generally refers to the combined earnings of everyone living in the same household. It includes wages, self-employment income, investment income, and benefits like Social Security. However, the precise definition can vary depending on the context and may exclude certain household members or types of income. Calculating your household income is often necessary when applying for financial assistance programs, such as health insurance subsidies through the ACA. It can also help you compare your financial standing to that of your peers, especially when you use the median household income as a reference point.