Calculate Area Median Income (AMI): Formula, Tables, and Rent Limits

To calculate AMI rent, take the HUD-published income limit that matches your program’s AMI percentage and the unit’s household size, multiply it by 30 percent, divide by 12, and then subtract the utility allowance if tenants pay their own utilities. The result is the maximum monthly contract rent you can charge. The formula is short. Picking the right inputs is where the work is.

The Formula

Every AMI-based rent calculation runs on the same three-step arithmetic:

Annual income limit × 30% = maximum annual gross rent
Maximum annual gross rent ÷ 12 = maximum monthly gross rent
Maximum monthly gross rent − utility allowance = maximum contract rent

The 30 percent multiplier is written into federal law. For Low-Income Housing Tax Credit properties, IRC Section 42(g)(2) caps gross rent at 30 percent of the imputed income limitation for the unit.¹ The same 30 percent figure sits behind the HOME rent limits and the tenant contribution formulas in public housing and Section 8.²

What varies from unit to unit is the income limit you feed into the formula. That number depends on the program, the location, the AMI percentage, and the household size assigned to the unit.

Pick the Right Income Limit Table

HUD publishes median family income estimates each year for every metropolitan area and non-metropolitan county, drawn from the Census Bureau’s American Community Survey and adjusted forward with Congressional Budget Office wage-growth projections.³ From those medians HUD builds tiered income limits, most commonly at 30 percent (extremely low income), 50 percent (very low income), and 80 percent (low income).⁴

Which set of tables you use depends on the program:

LIHTC properties use the Multifamily Tax Subsidy Project (MTSP) income limits, published separately by HUD. Do not use the standard Section 8 income limits for a LIHTC calculation. The MTSP tables incorporate a “hold harmless” protection that can make them differ from the general HUD figures for the same area.⁵
HOME-assisted rental units use HUD’s ready-made HOME rent limits, so most owners do not run the full 30-percent calculation themselves. High HOME Rent is the lesser of the local fair market rent or 30 percent of income at 65 percent AMI. Low HOME Rent is 30 percent of income at 50 percent AMI, capped at fair market rent.⁶
Public housing and Section 8 do not use a fixed AMI rent cap at all. Rent tracks the tenant’s actual income: the family pays the highest of 30 percent of adjusted monthly income, 10 percent of gross monthly income, or a designated welfare housing portion.²

Within LIHTC, the developer’s original election controls the AMI percentage: the 20-50 test (20 percent of units at 50 percent AMI), the 40-60 test (40 percent of units at 60 percent AMI), or an average income test.¹ That election tells you which column of the MTSP table to read.

Household Size Is Set by the Unit, Not the Tenant

For LIHTC rents, you do not use the actual number of people in the unit. The Internal Revenue Code assigns an imputed household size based on bedrooms:

Studio with no separate bedroom: 1 person
One-bedroom: 1.5 persons
Two-bedroom: 3 persons
Three-bedroom: 4.5 persons
Four-bedroom: 6 persons

The rule is 1.5 persons per separate bedroom.¹ Because HUD does not publish income limits in half-person increments, you interpolate between the two nearest whole-person figures for units with an odd number of bedrooms.

HUD’s underlying median is always pegged to a four-person household, then adjusted up or down for other household sizes. For households above eight people, HUD adds 8 percent of the four-person income limit for each additional member.⁷

A Worked Example

Say you own a two-bedroom LIHTC unit in a project that elected the 40-60 test. The imputed household size is 3 persons. You look up the MTSP income limit for a 3-person household at 60 percent AMI in your area and find $38,400.

$38,400 × 0.30 = $11,520 per year

$11,520 ÷ 12 = $960 per month maximum gross rent

That $960 is the ceiling on rent plus utility allowance combined. If the tenant pays no utilities directly, you can charge $960 as contract rent. If the tenant pays utilities and the applicable utility allowance is $100, your maximum contract rent drops to $860.

The Utility Allowance

Federal affordable housing rules treat rent and reasonable utility costs as one housing expense. When tenants pay utilities directly, you subtract a utility allowance from the gross rent cap to arrive at what you can actually charge.⁸ The allowance covers electricity, gas, water, sewer, and trash. It does not cover telephone, cable television, or internet.⁹

The source of the allowance depends on the building:

Rural Housing Service buildings use the RHS-prescribed allowance. Even one tenant receiving RHS rental assistance triggers this method for the whole building.⁹
HUD-regulated buildings use the HUD utility allowance for the building.
All other LIHTC buildings use the local Public Housing Authority allowance from the Section 8 program. An owner may also obtain a written estimate from the local utility company for a unit of similar size and construction, or request an estimate from the state housing agency that allocated the credits.⁹

Once an owner obtains a utility company or agency estimate for any unit, that estimate becomes the allowance for all rent-restricted units of similar size and construction in the building. Utility company estimates must be in writing, filed with the allocating agency, and made available to tenants. Utility costs move, so most owners recheck the allowance at least annually.

Mandatory Fees Count Toward Gross Rent

The rent cap covers more than the number on the lease. Any fee charged as a condition of occupancy counts toward gross rent. Parking, laundry, and similar charges for amenities included in the project’s eligible basis cannot be charged separately at all. If an amenity is not in the eligible basis, fees may be permissible under state and local law, but optional fees for services a tenant can decline generally stay outside gross rent.

Before setting rent, list every mandatory charge a tenant will face. Add those to the contract rent and utility allowance. If the total exceeds the maximum gross rent, one of the pieces has to come down.

When the Published Limits Change

HUD typically releases updated income limits around April 1 each year. The FY 2026 release was pushed to May 1 because the Census Bureau delayed its American Community Survey five-year data release from December 2025 to January 2026.¹⁰ When the new figures are higher, LIHTC owners can raise rents up to the new maximum, subject to lease terms and any state notice rules.

When the new figures are lower, the hold harmless rule kicks in. Created by the Housing and Economic Recovery Act of 2008, it prevents a LIHTC project’s area median gross income from dropping below the prior year’s figure. The protection lasts for the life of the project and continues past the initial 15-year compliance period.¹¹ A separate HERA Special provision applies to certain projects placed in service in 2007 or 2008, and those projects may use even higher income limits. Two LIHTC properties in the same city can end up with different maximum rents depending on when they were placed in service, so always pull the MTSP figure that matches your project’s situation rather than a general HUD income limit.

HOME projects have a parallel floor: rents for an existing project never have to drop below the limits in effect at the time of project commitment.⁶ If a unit is subject to both HOME and LIHTC, the rent cannot exceed the LIHTC gross rent calculated under IRC Section 42.

Programs Where This Formula Does Not Apply

If you are trying to calculate rent for a public housing or Section 8 unit, the AMI formula above is not the right tool. Those programs set the tenant’s payment as a share of that tenant’s actual income rather than as a cap tied to published AMI figures, and the rent adjusts through income recertification rather than annual limit updates.² The 30 percent multiplier is the same. What it multiplies is different.

1
Office of the Law Revision Counsel. 26 USC 42 – Low-Income Housing Credit
2
Office of the Law Revision Counsel. 42 USC 1437a – Rental Payments; Definitions
3
U.S. Department of Housing and Urban Development. Methodology for Calculating FY 2025 Medians
4
HUD USER. Income Limits
5
HUD USER. Multifamily Tax Subsidy (MTSP) Income Limits
6
eCFR. 24 CFR 92.252
7
HUD Exchange. HOME Income Limits
8
U.S. Department of Housing and Urban Development. Utility Allowances and Resources
9
eCFR. 26 CFR 1.42-10 – Utility Allowances
10
U.S. Department of Housing and Urban Development. Statement on FY 2026 Median Family Income Estimates
11
HUD USER. Hold Harmless for Reductions in Area Median Gross Income