How to Verify Student Status of Household Members

To comply with tax credit rules, you must verify the student status of each household member who says he or she is a student. That’s because tax credit rules bar households composed entirely of full-time students. And if the student is a member of a household that’s not barred for this reason, the household may get a break in its income calculation if that student has employment income. So not verifying a household member’s student status could lead to mistakes in determining eligibility or in calculating household income, and that puts the owner’s tax credits at risk or recapture by the IRS.

To help you get the right verification of household members’ student status, we’ll give you a form, Verification of Full-Time Student Status, that you can use to prove to your state housing agency that you’re complying with tax credit rules.

Why You Need to Verify Student Status

Whenever you certify or recertify a household, you must ask the household head whether any household members are full-time students or were full-time students at any time during the past calendar year. If the answer to either question is yes, you need to verify the status of each student household member to:

1. Determine whether household is composed entirely of full-time students. Tax credit rules generally bar the owner from claiming tax credits on any unit occupied entirely by “full-time students.” According to Chapter 17 of the Audit Guide for Completing Form 8823, for the LIHTC program, a student who’s a full-time student for any portion of five months out of the current calendar year is considered a full-time student for the entire calendar year. The months don’t need to be consecutive [Treas. Reg. §1.151-3(b)].

Also, the determination of student status as full- or part-time should be based on the criteria used by the educational institution the student is attending. An educational organization, as defined by IRC §170(b)(1)(A)(ii), is one that normally maintains a regular faculty and curriculum, and normally has an enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. The term “educational organization” includes elementary schools, junior and senior high schools, colleges, universities, and technical, trade, and mechanical schools. It doesn’t include on-the-job training courses.

A household consisting entirely of full-time students may not live in a tax credit unit unless at least one household member falls under one of several exceptions:

• A student receives assistance under Title IV of the Social Security Act (TANF);
• A student was previously in the foster care program;
• A student is enrolled in a job training program receiving assistance under the Job Training Partnership Act or under other federal, state, or local laws;
• The household is comprised of single parents and their children, and such parents are not dependents of another individual, and such children are not dependents of another individual other than a parent of such children. In the case of a single parent with children, the legislative history explains that none of the tenants (parent or children) can be a dependent of a third party; or
• The household contains a married couple entitled to file joint tax returns.

If no exceptions apply and you move in a household that’s made up entirely of full-time students, or a household later becomes composed entirely of full-time students, you risk losing tax credits on the unit if your state housing agency audits the site and finds the unit out of compliance. State housing agency auditors will look for back-up verification from the school to confirm the household member’s status. And even if you’re confident that the household isn’t composed entirely of full-time students, it’s good management practice to verify student status for every student household member each time you certify or recertify the household. One exception is minor children in elementary, middle, and high schools. Under tax credit rules, they’re presumed to be full-time students, so you don’t have to verify their status with the school unless the household head claims that the student is attending school on a part-time basis only.

2. Exclude full-time student’s earned income over $480. There’s another reason to verify student status even when the household is otherwise eligible: Some students who go to school full time are entitled to have employment income over $480 excluded from the household’s annual income. To get the income exclusion, the student must be full time as defined above and 18 years or older and not the head of the household, a co-head, or spouse [HUD Handbook 4350.3, par. 5-6(A)(3)(D)].

To comply with tax credit rules on certifying income, you must verify the status of each employed adult student to determine whether the household is entitled to have employment income more than $480 excluded from household income. If you don’t verify this, you could be moving in an ineligible household if the student’s employment income of more than $480 would cause the household’s annual income to exceed tax credit limits.

How to Use Our Form

You can use our form, Verification of Full-Time Student Status, to verify student status. Ask for the name and address of each student’s school and the name and/or title of a contact person at the school. This should be a school staff member who can answer, or get answers to, questions about full-time status. This person is typically the registrar or a staff member with a similar title.

Then, to use our form, fill in the name and/or title of the contact person to whom you’re sending the form and the name and address of the school, the site manager, and the household member. Also fill in the site manager’s telephone number. And ask the household member to sign the release statement on the form before you send out the form. The release statement shows the school’s contact person that the household member has okayed the release of confidential information to you.

What to Ask

Our form explains to the contact person that you need information from the school to help you certify or recertify the household member’s eligibility for tax credit housing. It asks the contact person to call you if he or she has any questions about the form.

The form asks:

• If the household member’s current subject load is considered “full-time” under the school’s standards. Remember, it doesn’t matter whether the student considers himself or herself to be part-time. You need to verify whether the school considers the student to be full-time under its standards.
• The date the student was enrolled as a full-time student. This helps you determine whether the household member has been or will be a full-time student for at least five months out of the calendar year.
• The date the student is expected to graduate.
• If the student is not currently enrolled full time, whether the school anticipates the student enrolling full time in the next 12 months. The school might know if the student has already registered for courses for the coming semester. In case the school doesn’t know the student’s plans, include a “don’t know” box.
• If the student no longer attends school, whether he or she attended full time for at least five months during the current calendar year. Even if the household member isn’t currently a full-time student, you need to find out if he or she attended school full time for at least five months of the current calendar year. For instance, a former student applying for tax credit housing in October may have attended school full time from January to June. So, even if he graduated, you need to verify his former status to ensure that the household is eligible.