K Rental Income Example
Murray owns two houses.
He rents one house and lives in the second. His tenant pays Murray $1,000 per month for rent. Murray pays $500 for mortgage, insurance, and taxes.
Murray spends approximately five hours per week managing his rental.
For NA purposes, since Murray spends an average of LESS than 20 hours per week managing the property, his rental income is treated as unearned rental income. Murry is eligible for the standard 40% self employment deduction because there is verification that an allowable business expense exists.
The standard 40% self employment deduction is manually deducted from Murray’s rental income as follows:
$1,000 - $400 = $600
Key the RE FS in the INC TYP field and $600 in the AMOUNT field on UNIN.