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In a roomer and boarder situation, net rental income is determined by deducting allowable expenses (see Section 3420.05.05) proportionately to the number of rooms (excluding bathrooms) in a private house or by the number of people living in the house.

Examples of roomer and boarder situations are as follows: • The applicant owns a seven-room house (excluding bathrooms) and rents one bedroom. The roomer pays $100 a month. All allowable expenses equal $400 a month. One-seventh of those expenses ($57.14) is deducted from gross rental income. $42.86 is budgeted as net rental income. • The applicant and his wife have a five-room house (excluding bathrooms) and rent one room with meals provided. The roomer and boarder pay $200 a month. Allowable income producing costs equal $200 a month and food costs equal $300. One-fifth of $200 = $40. One-third of $300 = $100. $140 is deducted from gross rental income. $60 is budgeted as net rental income. 3420.00.00 RENTAL INCOME Rental income is payment for the use of real or personal property. Rental payments may be received for the use of land (including farmland), for land and buildings, for a room, apartment, or house, or for machinery and equipment. 3420.05.00 BUDGETING RENTAL INCOME Rental income may be considered either unearned or earned income. Regardless, income from rental property is determined by the costs of doing business being deducted from the gross income. For MED 2: Rental income is unearned unless the production of income includes some type of personal involvement and effort on the part of an AG member. For MED 3: Rental income is either unearned or earned income. The income (or loss) is determined by allowable IRS deductions from the gross income.

For MED 1 and 4 (except MA R): Rental income is unearned income unless the AG owns multiple rental properties so that there is a rental business; that situation is considered self-employment earned income. 3420.05.05 ALLOWABLE RENTAL EXPENSES Allowable rental expenses include costs allowed by the Internal Revenue Service.5 Please, refer to Chapter 2810.30.00 and Section 3460.05.00. Examples of rental expenses allowed under all categories include: