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UPDATED: NOVEMBER 2007 145

INCOME UNEARNED

RENTAL INCOME

(7) Advertising for tenants;

(8) Any other expenses essential to maintaining the property (lawn care/snow removal).

Examples of non-deductible expenses:

(1) Payments on the principal of mortgages;

(2) Improvements to the property (i.e., an expense for an addition or increase in the value of the property);

(3) Any other expenses which are not directly related to maintaining the property.

NOTE: Depreciation or depletion of property is not a deductible expense from rental income.

Expenses are deducted when paid, not when incurred.

When the rental property is also the A/R’s homestead (i.e., two-family residence), the allowable expenses is prorated based on the number of units designated for rent compared to the total number of units.

Rental deposits are not income to the landlord while subject to return to the tenant. Rental deposits used to pay rental expenses become income to the landlord at the point of use.

When to Verify: (a) When the A/R declares in the application that part of his/her own home is rented out;