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How To Tell if You’re in a Low Income Community for EIDL Qualification

Quick Reference: Tax and PPP help.

The new stimulus program, signed into law in the last days of 2020, reopens the door for some aid for independent contractors such as with Doordash, Uber Eats, Lyft, Instacart, Grubhub etc.

But it also has contractors scrambling to figure out how to tell out if they're in a low income community.

That's because the EIDL has added a couple of qualifications. In the original round of EIDL loans, independent contractors were able to take advantage of a $1,000 grant. That was the advance that was given when businesses applied that doesn't have to be repaid.

Under this new round of funding, many contractors can apply for a second EIDL grant. However, there are two new stipulations:

  • Your business has to demonstrate a 30% or greater loss of income due to the pandemic
  • Your business has to be located in a low income community.
Image of disaster recovery start button with disclaimer: Information on the new stimulus program is rapidly changing. I will do my best to keep up on changes, but be aware things can and will change. Please note: I am not a legal or financial professionl and this is not financial advice. Please seek your own professional advice related to your individual situation.

This article focuses on the low income community qualification. You can learn more here about the 30% economic loss qualification.

3 Steps: How to tell out if you qualify as being in a low income community under EIDL requirements

What does it mean to be in a low income community? How do you know if your business is located in a low income community? Is it different for an independent contractor with gig economy apps like Doordash, Uber Eats, Lyft, Instacart, Grubhub or any of the others?

The following steps are meant to help you identify if your business is indeed in a low income community.

1. Understand your business location.

Location markers over a city to tell if it's a low income community

It seems a lot easier if you're operating a brick and mortar business to identify your business location. You have a store front or an office. That's your business location.

It's a little trickier as an independent contractor, isn't it? We drive passengers all around or deliver food. Does it matter if most of your rides or delvieries are in lower or higher income?

It's not really that tricky. You're going to identify your location in the same way you identify it for your taxes. It's your home address.

Most of us don't really work at home though. Our work is out where we're delivering. Wouldn't that mean we work in the places we perform our tasks?

Maybe the best way to explain it is to compare it to a a service business. When I was in telecom we hardly spent any time at the office, we were always out at customer locations.

None of that mattered though. Our business location was still where our office was. Even though we were never there, that served as our headquarters.

As an independent contractor, if you haven't leased or purchased an external location for your business, your business address is going to be your home address.

2. Understand what “low income community” means.

Run down trailers in a rural setting are often a mistaken concept of a low income community
We often think of something like this when we think “low income community” however many low income communities are not what you would expect.

In the new stimulus act, Section 332 section (a) provides some definitions. Item (6) states that “The term ‘‘low income community’’ has the meaning given the term in section 45D(e) of the Internal Revenue Code of 1986.”

So let's look at that section:

The term “low-income community” means any population census tract if-

(A) the poverty rate for such tract is at least 20 percent, or

(B)(i) in the case of a tract not located within a metropolitan area, the median family income for such tract does not exceed 80 percent of statewide median family income, or

(ii) in the case of a tract located within a metropolitan area, the median family income for such tract does not exceed 80 percent of the greater of statewide median family income or the metropolitan area median family income.

Internal Revenue Code of 1986 section 45D(e)(1).

What does this mean?

It mans there are three ways that you can measure if you're in a low-income community. You qualify if you meet any of those three.

If more than 20% of families in your community are below the poverty level, you're in a low income community

If the median family income in your community is 80% of that of your metro area or lower, you're in a low income area.

Or, If the median family income in your community is 80% of that of your state or lower, you're in a low income community.

Median stands for middle (not average). If you the income for 99 families and listed them in order from high to low, the income for the 50th family is the medium. 49 families had higher income, 49 had lower.

If the median family income in your state or your metro area is $100,000, then the median family income in your community needs to be less than $80,000 to qualify.

But what do they mean by “community?”

Is this about the city? But how is that different than a metro area? Can you just pick what your community is?

You can't just pick an area. Your community is based on your address as we disucssed earlier.

We go back to that first line in the definition quoted above. “The term ‘low-income community' means any population census tract…”

Your community is the census tract that your address is located in.

The Census Bureau divides counties up into smaller zones called tracts. According to their glossary, a tract is usually made up of about 1,200 to 8,000 people. The boundaries are set and can be found on many government maps.

Your address fits specifically within a particular census tract. Your eligibility depends on the income characteristics of families in that area or tract.

3. Here's how to tell if demographics in your tract qualify as a low income community.

Graphic of individuals on a chart illustrating community demographics

This video can show you how. Or you can read the instructions below it.

The SBA recently released this tool that allows you to look up an address and identify if it is a low income community per their definitions.

The map is pretty simple. If the zone is purple, it is a low income community. If it is yellow, the zone is not a low income community.

Screenshot from SBA Targeted EIDL Low Income Community map tool showing a map zone with census income information including poverty rate and median family income percent compared to state and metro areas.
The zone on this particular address shows that 25.78% of the tract were below the poverty rate, median family income in the tract was 62.95% of that of the Metro Area and 69.78% of that of the state. This zone qualifies under all three tests of being a low income community.

When you find your zone and click on the map, it will show you the pertinent details including poverty rate and percent of median family income compared to the state and the metro area.

You access the tool at PolicyMap. From there you can enter an address, a zip code, or zoom in and navigate to your address.

Things to double check when using the PolicyMap.

If you entered an address, double check that the spot it takes you to puts you at the right spot on the map. You may have to manually readjust if it did not completely understand your address.

For example, I entered the address to the White House. It told me immediately the area was a low income area, but when looking at the map, it didn't take me to the White House.

If you live on a street that serves as a boundary between two census tracts, make sure you're clicking on the side of the street that matches your address. For example, if you live on the south side of an east/west street, make sure you're looking at the tract that is south of the line.

Double check the data. There's a comment to this article that says they were told they don't qualify but the data that it shows was within parameters. There may be glitches that read this wrong.

I've seen a couple of anomalies. I found one zone where 64% were below poverty rate but median family income was 229% of California's MFI. I see my neighborhood is 26% poverty rate on another tool but only 12% on this particular tool. It's possible some data may be off.

If something does seem off, you can cross check your information.

When I first published this article, the SBA had not listed the tool mentioned above. I was able to identify this geomap tool created by the FFIEC. This tool will let you look up a census tract and pull up income information.

You will need to select 2020 in the upper left hand corner. Then type in an address or zip code and press Search.

Click on the button that says “Census Demographic Data.”

A Box will pop up with a table of information and four tabs across the top. Click on the tab that says Income.

Screenshot of a sample "Census Demographic Data" with Income tab highlighted, showing income statistics for that particular census tract.
The income tab of the Census Demographic Data shows income characteristics in your census tract.

Here you have the following information:

  • The percent of people below poverty level (#3)
  • The percent of the median family income in the tract compared to the median family income in the metro area (#4).
  • The estimated Tract Median Family Income (#5).

I notice that the numbers that this tool pulls up are slightly different than the numbers on the SBA's Targeted EIDL address lookup tool. I am assuming that there are differences in what years the tools are based on.

It's an imperfect system, but it's the one we get.

There's so much that is luck of the draw.

You could live or have your business on the north side of a street and not qualify while the address directly across the street qualifies. Personally I'm one block away from a zone that doesn't qualify.

The other thing is, the SBA is going to mess some things up. That's just a part of the deal.

Some folks were able to breeze through the PPP 2.0 application process, others got hung up. You can expect the same thing with the targeted EIDL advance. It's the same folks who administer it.

If you think you should qualify but the SBA tool says you don't, do some research. It's not easy to figure it all out but you can actually pull the census data for your tract and start running the numbers.

I haven't seen if there will be an appeal process if they determine you don't qualify. My guess is, by the time they get around to being able to take appeals (if ever) the money will have run out. If I find out anything further though on the process, I'll update this article.

In the meantime, check out the tools, get to know your census tract information, and if it seems like you're close to qualifying, dig a little deeper to identify the data that's out there.

Could this help someone else? Please share it.

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Linda G

Sunday 21st of February 2021

I am certain that I am understading your instructions in reading the stats of my tract to determine if I live in a low income community. However, when I go thru the FFEIC's interactive tool I see I do live in a low income community, but when I use the one the SBA just recently posted the the sba page it says my address does not qualify as a low income community. They both list the same tract number. 27.09% below poverty level,63.77% tract median family income and tract median income was $49,143 compared to the ffeic median income of $77,061. Please help me understand if Im missing something. Thank you so much for your time.

ronald.l.walter

Monday 22nd of February 2021

Before I go further, thank you for bringing that up. I should update the post with the new tool they posted.

That's really interesting. Did you use the Policy Map or the HubZone map. I've found both through searches - Hubzone says I don't, PolicyMap that's geared towards the EIDL says I do. https://sbaeidl.policymap.com/newmaps#/ is the link I found for the PolicyMap.

What I find really interesting is, if I understood you right, the statistics they show tell me you qualify, and it's not even close.

I will say that when I compare the Policy Map statistics to the FFIEC map, FFIEC tells me 22% are below poverty line and PolicyMap says 12%. I have no idea why the discrepancy, Pretty sure there hasn't been a dramatic change in my area, nothing that would cut that in half anyway. I'll update the post with the new EIDL specific tool.

Pinky

Saturday 13th of February 2021

I'm so embarrassed to say that I'm so confused and can't figure this out at all!!! Can someone PLEASE HELP ME OUT...I would appreciate it more than you know.My address is 1042 Jasmine Ct El Sobrante CA 94803 Thank you so very very much!!!

Linda G

Sunday 21st of February 2021

@Pinky, It looks as though your poverty level is at 6.28%, which is not a high enough percent living below the poverty level. Your tract median family income is 78.82%, which would qualify you because it is less than 80%. Tract median family income $73,958 divided by $93,822 = is how you get the 78.82% which qualifies you. I hope this helps and I hope I did this correctly. I am fairly certain that I did, per the instructions above.

Chong

Wednesday 20th of January 2021

What if you are living at a low income housing community in the medium income neighborhood. Are you qualified?

ronald.l.walter

Wednesday 20th of January 2021

To my understanding, it still depends on the criteria the Internal Revenue code. If the community is big enough that it skews the statistics for the census tract enough, it should count. If it's a fair sized enough community, it should impact the poverty level rate of the census tract enough - those tracts aren't very large.

Laurie

Tuesday 19th of January 2021

Thank you for explaining how to locate family income of a certain area. I am volunteering to assist friends with small businesses apply. So I hope I have this correct.... Looking at 2015 median family income for Illinois it is 79,729. So any area with a median family income below 20% of that figure or below 63,783 in Illinois would qualify? Do I have this right? Thanks

ronald.l.walter

Wednesday 20th of January 2021

To my understanding that is correct. One possibility is if the median family income in your metro area is lower than that of the state, that could lower that threshold. But generally the metro areas have a higher median income than statewide. I need to get clarification of that.

Orlando

Sunday 17th of January 2021

This is incorrect. The language in this article is using "Family Median Income". When you open up the State Income PDF, it says "Household" Median Income. This matches with the Censor demographic box which also contains a "Household Median Income" field. You therefore should be comparing apples with apples. Any given house can have more than one family in it. Divide the household median income with the state's "household" median income because that's what the PDF shows.

Orlando

Sunday 17th of January 2021

@Orlando, good link here, this shows Illinois's household median income reflects a different number than Illinois's family median income.

Here we see that the PDF you have provided in your article utilizes household income. So this is a bit confusing.

https://www.deptofnumbers.com/income/illinois/

Orlando

Sunday 17th of January 2021

@Orlando,

I'm not entirely sure of what I said. I don't mean to say that you're incorrect. But I do want to point out that it it's to compare household median income with household median income. It seems like the internet is circulating this language of comparing "family" median income with the states "household" income.