USDA Income Limits Explained: Moderate Income Is Bigger

Why "too much income" is usually wrong

The single most common reason people rule themselves out of a USDA loan is income. They hear the word "rural" and the phrase "low-to-moderate income" and assume the program is only for families scraping by. Then they see a headline number and think their salary blows right past it.

Most of the time, they are wrong, and it costs them a house.

USDA income limits are more generous than almost anyone expects, and the way household income is measured leaves room for deductions that pull your qualifying number down. Let me explain how it actually works so you can figure out where you really stand.

The 115% rule in plain English

USDA caps eligibility at 115% of the area median income, or AMI, for the county where you are buying. Area median income is essentially the midpoint income for households in that area, and USDA lets you earn up to 15% above it and still qualify. Because that percentage floats with local incomes, higher-cost areas get higher limits automatically.

For 2025, the base limit that applies to most Texas and Arizona counties is $119,850 for a household of one to four people and $158,250 for a household of five to eight. For households larger than eight, USDA adds 8% of the base for each additional member. These are 2025 figures announced in mid-2025 and in effect through the current fiscal year, and they are subject to change.

That base number alone surprises people. A dual-income household earning six figures can still be under the cap.

Higher-cost areas run higher

The base is a floor for most rural counties, not a ceiling everywhere. Metros with higher living costs carry higher limits. A few representative 2025 figures for our markets:

Phoenix-Mesa-Chandler, Arizona: roughly $129,000 for a one-to-four-person household and about $170,300 for five to eight.
Flagstaff, Arizona: roughly $125,400 and $165,550.
Higher-cost Texas metros near Austin can run up to about $125,000 and $165,000 for the two tiers.

These vary by county and move every fiscal year, so I never hard-code them into an approval. I treat them as a guide and verify your exact county before we go far. The point is simply that "moderate income" is a bigger tent than the label suggests.

Whose income counts, and this is where people trip

Here is the part that catches buyers off guard. USDA looks at total household income, not just the income of the people signing the loan. Every adult who will live in the home has their income counted toward the eligibility cap, even if they are not a borrower.

So if you are buying a home and your adult sibling is moving in with a full-time job, or a parent with retirement income is joining the household, their income counts toward whether you fit under the limit. This is different from the income used to qualify you for the payment, which is based only on the borrowers. It is a two-sided calculation, and mixing them up is one of the most common mistakes I see. We walk through exactly how the underwriter runs it in our companion post on calculating your USDA household income.

The deductions that quietly lower your number

Now the good news that balances out the household-income rule. USDA does not simply add up every dollar and compare it to the cap. It allows specific deductions from your annual household income before applying the 115% test. Depending on your situation, those can include an allowance for dependents, certain childcare costs, and deductions tied to elderly or disabled household members, among others.

I have had families who were a few thousand dollars over the raw number come in comfortably under the limit once we applied the deductions they qualified for. If you ran your own math and landed just above the cap, do not stop there. The adjusted figure is what matters, and it is almost always lower than the gross.

A quick example

Take a family of four outside Casa Grande. Two parents work and together gross about $122,000, and they have two young kids in daycare. On paper, $122,000 looks like it clears the $119,850 base limit and disqualifies them. But once we apply the dependent allowance and eligible childcare costs, their adjusted household income drops under the cap and they qualify. Same family, same paychecks, completely different outcome, all because the deductions were counted correctly.

That is why I never let someone walk away over a number they calculated at their kitchen table. You can get a ballpark on your payment side with our USDA loan calculator, but the income-eligibility side is worth having a professional run.

What income limits are not

A couple of clarifications, because I want you to hold this correctly. The income limit is about eligibility for the program, not a promise of approval. You still have to qualify on credit, debt ratios, and the property. Clearing the income cap gets you in the door; it does not hand you the keys.

And the limit is not permanent. USDA republishes these figures, typically each fiscal year, and your household situation can change too. A mid-year raise or a new working adult joining the household can move you. If your file is close to the line, timing can matter, and that is a conversation worth having early.

Common questions about USDA income limits

Does overtime or bonus income count toward the limit?

Generally, yes. USDA is looking at the income the household actually receives, so stable overtime, bonuses, and commission usually count toward the eligibility calculation, along with base wages, self-employment income, and many benefit payments. There is nuance to how consistent that income has to be, which is one more reason a professional should run your specific numbers rather than you eyeballing a pay stub. If a big chunk of your income is variable, tell me early so we account for it correctly.

What if my income is right at the limit?

Then timing and accuracy matter more than usual. Because the household calculation counts every adult and the deductions can swing your adjusted figure by thousands, a file that looks over the cap on paper can land under it once the math is done right, and vice versa. A raise or a new working adult in the home mid-process can also move you. If you are within a few thousand dollars of your county limit, we treat the number carefully and confirm it against the current USDA figures before you write an offer.

Do the limits change every year?

Yes. USDA republishes the income limits, typically each fiscal year, and they can move up or down by county. The 2025 base figures of $119,850 and $158,250 are what apply for most of our markets right now, but I always verify the live number for your county rather than trusting a figure from last year.

Find your real number

The honest answer to "do I make too much for a USDA loan?" is almost always "let's check, because you probably do not." Between the generous base limits, the higher metro figures, and the deductions, the tent is wider than the label implies.

Send us your county, your household makeup, and your gross income, and we will run it against the current limits and the deductions you qualify for. The fastest way to start is to take our eligibility quiz. If you want the regional picture first, our guides to USDA home loans in Texas and Arizona cover how the limits play out across each state.

Tanner Cook is a licensed mortgage loan originator (NMLS #2090424) with Cook Brothers Mortgage Team, powered by Cornerstone First Mortgage, LLC (NMLS #173855). This article is for educational purposes only. It is not financial advice or a commitment to lend. USDA loan program terms are set by the U.S. Department of Agriculture and are subject to change. Cornerstone First Mortgage, LLC is not affiliated with, endorsed by, or acting on behalf of the USDA or any federal or state government agency. Not all applicants will qualify. Loan approval is subject to credit, income, and property eligibility. Equal Housing Lender.