FAA6.N Examples : 26 Self-Employment Income (SEEI/SEEW) Examples : E Rental – Self Employment Example
E Rental – Self Employment Example
 
Murray owns two separate duplex apartments.
 
He rents three of the apartments and lives in the fourth. The duplexes are connected to a single water meter. The water expense for the duplexes is billed to Murray.
 
Murray spends approximately 25 hours per week managing his rentals.
 
For CA and MA purposes, Murray's rental income is considered self-employment. For MA, three-fourths of his water expense is an allowable business expense, since his personal water costs are not an allowable business expense. For CA, Murry is eligible for the standard 40% self-employment deduction.
 
Key RA in the TYPE field on SEEI (counts for CA and MA). Key the income (I) and expenses (E) on SEEW. AZTECS then applies the 20% earned income deduction.
 
For NA purposes, since Murray spends MORE than 20 hours per week managing the property, his rental income is treated as self-employment. AZTECS applies the 20% earned income deduction and the standard 40% self-employment deduction because there is verification that at least one allowable business expense exists.
 
Key one-fourth of the water expense (WA) on EXNS as an allowable shelter expense.