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2) Calculate gross annual allowable operational expenses. (a) Deduct predictable expenses paid by the a/b which are necessary for the production or collection of rental income. These expenses include but are not limited to the following:

1) The interest portion of a mortgage payment, 2) Property taxes, 3) Insurance, 4) Maintenance, 5) Utility costs paid by the a/b, 6) Labor costs, 7) Real estate agent’s fees, 8) Sales taxes, 9) Advertising for tenants, 10) Verified transportation costs related to rental property operation. 11) Interest payments on loans for equipment necessary to produce the rental income. (b) Unexpected expenses are unanticipated expenses that are necessary for the collection of rental income and must be paid from rental income (e.g., repairs to an appliance or minor corrections to an existing structure). When an a/b reports an unexpected expense that must be paid from the rental income, treat as a change in situation.

1) Verify whether the expense is an operational expense (necessary for the collection of rental income) vs a capital expenditure (increase the value of property). Only operational expenses are allowable deductions. 2) If the expense is an allowable operational expense, recalculate net countable monthly rental income to determine deductible (PLA) or Patient Monthly Liability (PML) for Long-term Care.