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1241 (07/2026) Chapter 8: Examples • Chapter 8: Examples Example 2: Individual is sole owner of home and pays utilities. Two rooms are rented. Sally owns her own home and pays $2000 each month towards mortgage and other fees. Of this $2000, $1600 goes to principal, $100 to interest, $150 to property taxes and $150 to real estate insurance. The interest, property taxes, and real estate insurance are allowable expenses; the principal is not allowable. Sally pays the utilities on the home and verified they are $475 a month. This brings Sally’s total allowable expenses to $875. Sally rents two rooms to two couples; each of the couples pays Sally $400 a month for their room. Sally is receiving $800 a month from the couples in total. The home has 3 bedrooms, 2 bathrooms, 1 living room and 1 kitchen. The basement has been converted into a family room. That makes 6 rooms in total as the bathrooms are excluded and the converted basement is included. Prorate this by dividing the allowable monthly expense of $875 by the number of livable rooms, 6. This gives you the single prorated lodger expense of $145.83. Multiply this amount by the number of rooms being rented, 2; note that the number of tenants does not matter. This amount is the total lodger expense of $291.66. Subtract this prorated expense of $291.66 from the monthly lodger rental income of $800 to get the reduced lodger income of $508.34. This is the countable lodger income amount. Note: The calculation is based on number of rooms being rented, not tenants, if one or two people rent a single room the calculation does not change. Calculation: Monthly Mortgage is $2000 $1600 principal, $100 interest, $150 property taxes, $150 real estate insurance. Owner pays all utilities, verified to be $475. The utilities, taxes and insurance are allowable expenses; the principal is excluded. This brings the total allowable housing expense to $875 ($475 + $100 + $150 + $150 = $875) Home: 3 bed, 2 bath, 1 living room, 1 kitchen. The basement has been converted into a family room. There are 6 total rooms (3 bedrooms + 1 living room + 1 kitchen + 1 converted basement) (bathrooms are excluded) 2 separate bedrooms are being rented to two couples (4 people in total). Rent is $400 for each of the two rooms. ($800 total) $875/6 = $145.83 Allowable housing expense divided by number of livable rooms = prorated Lodger reduction for one room $145.83 x 2 = $291.66 Lodger reduction for one room multiplied by the number of rooms being rented = total prorated Lodger reduction $800 - $291.66 = $508.34 Lodger income minus total prorated Lodger reduction = Adjusted Lodger income