In determining the poverty status of families and unrelated individuals, the Census Bureau uses thresholds (income cutoffs) arranged in a two-dimensional matrix. The matrix consists of family size (from one person to nine or more people) cross-classified by presence and number of family members under 18 years old (from no children present to eight or more children present). Unrelated individuals and two-person families are further differentiated by age of reference person (RP) (under 65 years old and 65 years old and over).
To determine a person's poverty status, one compares the person's total family income in the last 12 months with the poverty threshold appropriate for that person's family size and composition (see example below). If the total income of that person's family is less than the threshold appropriate for that family, then the person is considered "below the poverty level," together with every member of his or her family. If a person is not living with anyone related by birth, marriage, or adoption, then the person's own income is compared with his or her poverty threshold. The total number of people below the poverty level is the sum of people in families and the number of unrelated individuals with incomes in the last 12 months below the poverty threshold.
Since ACS is a continuous survey, people respond throughout the year. Because the income questions specify a period covering the last 12 months, the appropriate poverty thresholds are determined by multiplying the base-year poverty thresholds (1982) by the average of the monthly inflation factors for the 12 months preceding the data collection. See the table below titled "Poverty Thresholds in 1982, by Size of Family and Number of Related Children Under 18 Years (Dollars)," for appropriate base thresholds. See the table "The 2006 Poverty Factors" for the appropriate adjustment based on interview month.
For example, consider a family of three with one child under 18 years of age, interviewed in July 2006 and reporting a total family income of $14,000 for the last 12 months (July 2006 to June 2006). The base year (1982) threshold for such a family is $7,765, while the average of the 12 inflation factors is 2.19359. Multiplying $7,765 by 2.19359 determines the appropriate poverty threshold for this family type, which is $17,033. Comparing the familys income of $14,000 with the poverty threshold shows that the family and all people in the family are considered to have been in poverty. The only difference for determining poverty status for unrelated individuals is that the person's individual total income is compared with the threshold rather than the familys income.
For example, consider a family of three with one child under 18 years of age, interviewed in July 2006 and reporting a total family income of $14,000 for the last 12 months (July 2006 to June 2006). The base year (1982) threshold for such a family is $7,765, while the average of the 12 inflation factors is 2.19359. Multiplying $7,765 by 2.19359 determines the appropriate poverty threshold for this family type, which is $17,033. Comparing the familys income of $14,000 with the poverty threshold shows that the family and all people in the family are considered to have been in poverty. The only difference for determining poverty status for unrelated individuals is that the person's individual total income is compared with the threshold rather than the familys income.
The 2006 Poverty Factors:

Interview Month	Poverty Factors
January	2.14841
February	2.15589
March	2.16297
April	2.17003
May	2.17705
June	2.18455
July	2.19359
August	2.20366
September	2.21330
October	2.22219
November	2.22879
December	2.23073

Poverty Thresholds in 1982, by Size of Family and Number of Related Children Under 18 Years Old (Dollars)

Size of family unit	Related children under 18 years
	None	One	Two	Three	Four	Five	Six	Seven	Eight or more
One person (unrelated individual)
Under 65 years	5,019
65 years and over	4,626
Two persons
Householder under 65 years	6,459	6,649
Householder 65 years and over	5,831	6,624
Three persons	7,546	7,765	7,772
Four persons	9,950	10,112	9,783	9,817
Five persons	11,999	12,173	11,801	11,512	11,336
Six persons	13,801	13,855	13,570	13,296	12,890	12,649
Seven persons	15,879	15,979	15,637	15,399	14,955	14,437	13,869
Eight persons or more	17,760	17,917	17,594	17,312	16,911	16,403	15,872	15,738
Nine persons or more	21,364	21,468	21,183	20,943	20,549	20,008	19,517	19,397	18,649

Poverty status was determined for all people except institutionalized people, people in military group quarters, people in college dormitories, and unrelated individuals under 15 years old. These groups were excluded from the numerator and denominator when calculating poverty rates.

For various reasons, the official poverty definition does not satisfy all the needs of data users. Therefore, some of the data reflect the number of people below different percentages of the poverty thresholds. These specified poverty levels are obtained by multiplying the official thresholds by the appropriate factor. Using the previous example cited (a family of three with one related child under 18 years responding in July 2006), the dollar value of 125 percent of the poverty threshold was $ 21,291 ($ 17,033x 1.25).

Income deficit represents the difference between the total income in the last 12 months of families and unrelated individuals below the poverty level and their respective poverty thresholds. In computing the income deficit, families reporting a net income loss are assigned zero dollars and for such cases the deficit is equal to the poverty threshold. This measure provides an estimate of the amount, which would be required to raise the incomes of all poor families and unrelated individuals to their respective poverty thresholds. The income deficit is thus a measure of the degree of the impoverishment of a family or unrelated individual. However, please use caution when comparing the average deficits of families with different characteristics. Apparent differences in average income deficits may, to some extent, be a function of differences in family size.

Aggregate income deficit refers only to those families or unrelated individuals who are classified as below the poverty level. It is defined as the group (e.g., type of family) sum total of differences between the appropriate threshold and total family income or total personal income. Aggregate income deficit is subject to rounding, which means that all cells in a matrix are rounded to the nearest hundred dollars. (For more information, see "Aggregate" under "Derived Measures.")

Mean income deficit represents the amount obtained by dividing the total income deficit for a group below the poverty level by the number of families (or unrelated individuals) in that group. (The aggregate used to calculate mean income deficit is rounded. For more information, see "Aggregate Income Deficit.") As mentioned above, please use caution when comparing mean income deficits of families with different characteristics, as apparent differences may, to some extent, be a function of differences in family size. Mean income deficit is rounded to the nearest whole dollar. (For more information on means, see "Derived Measures.")

When the original poverty definition was developed in 1964 by the Social Security Administration (SSA), it focused on family food consumption. The U.S. Department of Agriculture (USDA) used its data about the nutritional needs of children and adults to construct food plans for families. Within each food plan, dollar amounts varied according to the total number of people in the family and the family's composition, that is, the number of children within each family. The cheapest of these plans, the Economy Food Plan, was designed to address the dietary needs of families on an austere budget.
Since the USDAs 1955 Food Consumption Survey showed that families of three or more people across all income levels spent roughly one-third of their income on food, the SSA multiplied the cost of the Economy Food Plan by three to obtain dollar figures for total family income. These dollar figures, with some adjustments, later became the official poverty thresholds. Since the Economy Food Plan budgets varied by family size and composition, so too did the poverty thresholds. For two-person families, the thresholds were adjusted by slightly higher factors because those households had higher fixed costs. Thresholds for unrelated individuals were calculated as a fixed proportion of the corresponding thresholds for two-person families. The poverty thresholds are revised annually to allow for changes in the cost of living as reflected in the Consumer Price Index for All Urban Consumers (CPI-U). The poverty thresholds are the same for all parts of the country; they are not adjusted for regional, state, or local variations in the cost of living .

Since poverty is defined at the family level and not the household level, the poverty status of the household is determined by the poverty status of the householder. Households are classified as poor when the total income of the householder's family in the last 12 months is below the appropriate poverty threshold. (For nonfamily householders, their own income is compared with the appropriate threshold.) The income of people living in the household who are unrelated to the householder is not considered when determining the poverty status of a household, nor does their presence affect the family size in determining the appropriate threshold. The poverty thresholds vary depending upon three criteria: size of family, number of children, and, for one- and two- person families, age of the householder.

A household includes all the people who occupy a housing unit. (People not living in households are classified as living in group quarters.) A housing unit is a house, an apartment, a mobile home, a group of rooms, or a single room that is occupied (or if vacant, is intended for occupancy) as separate living quarters. Separate living quarters are those in which the occupants live separately from any other people in the building and which have direct access from the outside of the building or through a common hall. The occupants may be a single family, one person living alone, two or more families living together, or any other group of related or unrelated people who share living arrangements.

A measure obtained by dividing the number of people in households by the number of households. In cases where people in households are cross-classified by race or Hispanic origin, people in the household are classified by the race or Hispanic origin of the householder rather than the race or Hispanic origin of each individual. Average household size is rounded to the nearest hundredth.