Real and/or personal property which produces income is excluded if it meets the conditions of a trade or business or a non-trade or non-business property conditions.
Non-Trade / Non-Business
For property which produces income, but is not used in a trade or business; up to six-thousand ($6,000) of the equity value is excluded, if the property produces a net annual return equal to at least six percent (6%) of the excluded equity.
Any portion of the property’s equity in excess of six-thousand dollars ($6,000) is a countable resource.
If an individual owns more than one (1) piece of income-producing property, the six percent (6%) return requirement applies individually to each property and the six-thousand ($6,000) equity value limit applies to the total equity value of all the properties meeting the six percent (6%) return requirement.
Examples of non-business income producing property are rental property, timber rights, mineral rights, etc.
example
Mr. Jones applies for nursing home benefits. He owns 2 houses that he rents. He rents a house valued at $80,000 for $500 per month, and he rents a house valued at $90,000 for $600 per month. He owes nothing on any of these houses. He does not report this as self-employment and he does not invest his labor in producing the income. How are these houses considered for nursing home benefits?
In this example, the rental property is not considered a business. Mr. Jones is not involved in managing the property. You have to determine if he meets the 6% rule for each property.
Property #1:
Receives $500 a month with a value of $80,000. He has to receive 6% of $80,000 annually, which is $4800. He receives ($500 x 12) = $6000.
He meets the rule for Property #1, so any equity above the $6000 is counted. Total equity considered for Property #1 is $74,000.
Property #2:
Receives $600 a month with a value of $100,000. He has to receive 6% of $100,000 annually, which is $6000. He receives ($600 x 12) = $7200.
He meets the rule for Property #2, so any equity above the $6000 is counted. Total equity considered for Property #2 is $94,000.
The total equity to consider for both properties is $168,000.
The gross rental income is considered as unearned income with no deductions allowed, $1100 per month).
Comments or Suggestions?
We want Quest to be your source for important information that you need to succeed at in your work but we need your help:
Was this article helpful? Was it missing something you needed to get the job done?
Tell us what you think, what you know about this article. What are we doing well, and what we could do better.
All fields are required.