For TANF/GA-related categories of MA, the CAO must consider rental income as unearned income if the property that the individual owns is managed by a rental agency or any other third party and the individual is not responsible for managing the property.
For SSI-related categories of MA, the CAO must count rental income as unearned income unless the rental income is reported to the Internal Revenue Service (IRS). If it is reported to the IRS, the income must be treated as self-employment earned income. (See Chapter 352, Self-Employment, Section 352.42, Renting Real or Personal Property—SSI-Related.)
The following are allowable deductions from unearned rental income for SSI-related categories of NMP:
Expenses related to producing or collecting the rental income, such as property taxes, advertising for tenants, landscaping, snow removal, utilities and the amount paid to a rental agency to handle the property.
Real estate insurance costs, no matter whether the mortgage holder requires insurance.
The interest part of a mortgage payment.
NOTE: Divide the interest amount from the year before by 12 to get the monthly amount.
Other repair costs, such as patching a roof, patching a driveway or replacing a light switch or faucet
NOTE: The CAO must not allow deductions for depreciation or depletion or individual expenses unrelated to the rental income or capital expenses. A capital expense is money spent on something that adds to the value of the rental property, such as replacing a roof, building a new driveway, rewiring a house or installing new plumbing. The CAO must contact the IRS if it is not sure whether an item is a capital expense.
If only a part of the rental property is set aside for rent, the CAO must prorate the allowable expenses, as follows:
Figure the expenses for land rental on the part that is for rent.
Example: Mr. Baxter owns 40 acres of land, 20 acres of which he rents to ranchers for grazing. His only expense is the real estate tax of $200 a year. Because Mr. Baxter rents only half of the property, only 50% of the tax is an allowable expense when counting his rental income.
If the individual lives in the building and all units are about the same size, divide the income covering the entire building by the number of units in the building.
Example: Mrs. Cash owns a four-unit apartment building. All the units are about the same size. Mrs. Cash lives in one unit and rents the other three. The CAO must deduct 75% of the allowable expenses.
If the individual lives in the building and the units are not equal in size, divide the expenses covering the entire building by the total number of rooms in the building, whether or not they are occupied.
NOTE: Count rooms in basements and attics if they are used as living spaces. Do not count a bathroom as a room.
If the individual rents rooms in his or her home, divide the expenses covering the entire home by the total number of rooms in the home.
Example: One bedroom in a six-room house is rented. The CAO must deduct one-sixth of the allowable expenses. This applies no matter whether the tenant is allowed to use the kitchen, living room or dining room.
The CAO must subtract the $20 unearned income deduction from unearned rental property income if the deduction has not already been given.
The CAO must allow a deduction from unearned rental income for the fee paid to the rental agency or third party to manage the property.
Updated February 14, 2012, Replacing July 24, 2008