PM 08-04-01-d.

Rental Property Is Not Part of the Homestead

Figure net rental income by subtracting the actual cost of doing business from the actual gross rental income.

Rental expenses include:

  • taxes,
  • principal and interest payments,
  • insurance,
  • repairs, and
  • utilities

paid by the landlord.

Multi-unit Property Includes Homestead

  1. Base the prorated share on the number of rental units in the building.
  2. Figure net rental income by allowing as rental expenses a prorated share of:
    • taxes,
    • principal and interest payments,
    • insurance,
    • repairs, and
    • utilities.

      NOTE: Allow as shelter costs for the FS unit: 

    • FS unit's share of principal and interest on mortgage, taxes, and insurance, and
    • the Air Conditioning/Heating Standard.

Single Family Unit

When the FS unit rents out a portion of its dwelling and expenses cannot be separately identified:

  1. Figure the rental expenses by:
    • adding housing and utility costs (drop cents),
    • divide the total costs by the total number of rooms in the dwelling (dropping cents), and
    • multiply the per room cost by the number of rooms being rented out. 

      Example: Total housing and utility costs are $400. There are 8 rooms in the dwelling and 3 are rented out. Figure rental expenses:

      $400 ÷ 8 rooms = $50 X 3 rooms = $150 expenses.

    1. Use actual utility expenses. Do not use the Air Conditioning/Heating Standard to figure business expenses.

      NOTE: Allow the Air Conditioning/Heating Standard as a shelter expense when figuring the FS unit's shelter costs deduction. 

  2. Figure net rental income by subtracting rental expenses from gross rental income received for the budget month.