On its website, the IRS has posted answers to frequently asked questions (FAQs) about the taxability of Emergency Rental Assistance payments.
Background.
The Consolidated Appropriations Act, 2021 (CAA, 21; PL 116-260, 12/27/2020) allows states, political subdivisions of states, U.S. territories, Indian Tribes, and the Department of Hawaiian Home Lands (“Distributing Entity”) to use certain funds allocated by the Treasury Department to provide financial assistance to households to pay rent, utilities, home energy, and other related expenses.
The American Rescue Plan Act of 2021 (ARPA or ARP Act; PL 117-2, 3/11/2021) provides additional funds for states, political subdivisions of states, and U.S. territories to provide financial assistance to households to pay rent, utilities, home energy, and other related expenses.
Payments under both provisions are referred to as “Emergency Rental Assistance” in the following FAQs.
Emergency rental assistance FAQs.
These FAQs cover the taxability of Emergency Rental Assistance (ERA) payments received by taxpayers, landlords or utility and home energy providers.
Q1. I am a renter who received ERA payments from a Distributing Entity (DE) for use in paying my rent. Are these payments includible in my gross income?
A1. No. ERA payments are not considered income.
Q2. I am a renter who received ERA payments from a DE for use in paying my utilities or home energy expenses. Are these payments includible in my gross income?
A2. No. ERA payments, including payments for utilities or home energy expenses, are not considered income.
Q3. I am a renter who received ERA from a DE for use in paying my rent, utilities, and/or home energy expenses, but the DE made the payments on my behalf directly to my landlord and/or my utility companies. Are these payments includible in my gross income?
A3. No. ERA payments made on behalf of renter are not considered income.
Q4. I am a landlord and I have a tenant who qualifies for ERA. A DE sent me an ERA payment on my tenant’s behalf. Is this payment includible in my gross income?
A4. Yes. Rental payments you receive, whether from your tenant or from a DE on your tenant’s behalf, are includible in your gross income.
Q5. I run a utility company that has a customer who qualifies for ERA. A DE sent my company an ERA payment on the customer’s behalf. Is the payment includible in my company’s gross income?
A5. Yes. Utility payments your company receives, whether from a customer or from a DE on the customer’s behalf, are includible in your company’s gross income.
To continue your research on more information about emergency rental assistance, see FTC 2d/FIN ¶J-1486.1
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