income from salaries, wages, commissions, royalties, bonuses, dividends, severance pay, pensions, interest, trust income, annuities, capital gains, social security benefits except as listed below, workers’ compensation benefits, unemployment insurance benefits, disability insurance benefits, veterans’ benefits, spousal support, rental income, gifts, prizes or awards.
§ 20-108.2(C) further provides that “[g]ross income shall be subject to deduction of reasonable business expenses for persons with income from self-employment, a partnership, or a closely held business.”
Pursuant to this code section, Virginia courts have consistently deducted expenses associated with rental properties from the rental income on those properties in calculating gross income. Some of the expenses commonly deducted include: mortgage payments, taxes, insurance, cleaning and maintenance, supplies, legal fees, association dues, and other operational expenses associated with rental properties. In Debra Ann Vitus v. Jon Dega, Record No. 2512-06-4 (Va. App. August 14, 2007), the Virginia Court of Appeals held that the trial court erred in finding that rent proceeds were income to the husband without deduction for mortgage expenses. Similarly, in West v. West, 23 Cir. CH03938 (2010), the circuit court considered evidence of overall rental income loss in calculating gross income.
Although Virginia courts have granted deductions for expenses associated with rental properties in calculating gross income, the burden is on the party seeking deductions to present sufficient credible evidence of such expenses to the court. Failure to present such evidence can preclude such expenses being deducted from the rental income. In Davies v. Ritter, 19. Cir. CL200713527 (2008), the defendant testified that his costs on a rental property exceeded his monthly rental income resulting in a negative cash flow on the property. However, the defendant failed to specify the exact amount of his costs on the rental property. Therefore, because the expenses claimed by the defendant were not sufficiently credible or certain for the court to determine the defendant’s net rental income, the court disallowed the deduction of those expenses in calculating the defendant’s gross income.
The party seeking deductions for rental property expenses can show the expenses through mortgage statements showing monthly mortgage payments, statements showing property taxes and association dues, and receipts and invoices for any necessary work done on the rental property.
If either party in your child support case has rental income and rental expenses, be sure to discuss this issue with an experienced family law attorney in your jurisdiction. From offices in Fairfax, Leesburg, Fredericksburg and Manassas, the experienced family law attorneys at Livesay & Myers represent clients in child support cases across Northern Virginia. Contact us to schedule a consultation today.