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UPDATED: AUGUST 1999

144

INCOME UNEARNED

RENTAL INCOME

Description: Rent is a payment that an individual receives for the use of real or personal property, such as land, housing or machinery. Net rental income is gross rent less the ordinary and necessary expenses paid in the same taxable year.

Policy: For SSI-related A/Rs, net rental income is unearned income unless it is earned income from self-employment (e.g., someone who is in the business of renting properties).

For S/CC, LIF and ADC-related A/Rs, net rental income is earned income.

References: SSL Sect.

366

Dept. Reg.

360-4.3 (d)

Interpretation: For SSI-related A/Rs: income received from non-business rental property is considered unearned income after allowable expenses have been deducted. For LIF, S/CC and ADC-related A/Rs: income received from non- business rental property is considered earned income after allowable expenses have been deducted. (See RESOURCES REAL PROPERTY and REAL PROPERTY INCOME-PRODUCING)

Ordinary and necessary expenses are those necessary for the production or collection of rental income. Examples of deductible expenses are:

(1) Property, school, water and sewer taxes;

(2) The cost of utilities if they are included in the rent;

(3) The cost of fire, windstorm, flood, theft and liability insurance; (4) Interest payments on mortgages for such property;

(5) The cost of essential repairs on such property (i.e., minor correction to an existing structure);

(6) Wages paid to employees for maintaining the property;

(MRG)