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MISSISSIPPI DIVISION OF MEDICAID Eligibility Policy and Procedures Manual CHAPTER 200A – Income: ABD Categories Page |73 Effective Month: July 2025 Determining Net Rental Income • Determine gross rent received and deductible expenses month by month. • Subtract deductible expenses paid in a month from gross rent received in that same month. • If deductible expenses exceed gross rent in a month, subtract excess expenses from the next month’s gross rent and continue doing this as necessary until the end of the tax year in which the expense is paid. • If there are still excess expenses, subtract them from the gross rent received in the month prior to the month the expenses were paid and continue doing this as necessary to the beginning of the tax year. • Do not carry excess expenses over to other tax years and do not use them to offset other income. Example: An individual receives $100 gross rental income monthly. He pays allowable expenses of $200 in July and $400 in November. His taxable year is January 1 through December 31. The allocation is as follows: The $200 allowable expenses paid in July reduce the net rent to zero in July (the month the expenses were paid) and in August (the subsequent month). The $400 allowable expenses paid in November, reduce the net rental income to zero in November (the month paid), December (the subsequent month), October (the preceding month) and September (the next preceding month). Timely Submission of Allowable Expenses Allowable expenses must be submitted timely in order for the expense to be considered as a deduction from rental income. The policy specifies to begin the deduction in the month in which the expense is paid. For each month the expense is not submitted after payment of the expense, the deduction is lost; although any excess may be allowed in a subsequent month or month prior to payment if an excess exists at the end of the tax year. Verification of Rental Income Request the individual’s federal income tax return, including Schedule E, for the most recent closed tax year and retain a copy for the file. This will be helpful in identifying the most usual expenses deducted from rental income in the past and aid in