Derive net rental income by deducting the following items from the gross:
interest, but not principal, portion of mortgage payments
upkeep and major repairs – deduct either actual amount spent each month or 15% of the gross rental plus $4.17 per month
Prorate the above expenses on the same periodic basis as the periodic basis on which
rental income is received (e.g., quarterly, monthly). Multiply rental income received
weekly by 4 1/3 to convert to a monthly amount.
NOTE: Under the ordinary life estate agreement, the life tenant is entitled to the use and/or
income from the property. He or she is also responsible for the usual costs of ownership
such as taxes and upkeep. However, if the life estate agreement stipulates that the
person to whom the life estate will revert is responsible for certain expenses, such
expense payments are not income to the life tenant.