On its website, the IRS has issued a series of FAQs regarding the taxation of emergency rental assistance payments provided under the Consolidated Appropriations Act, 2021.
Background. Section 501, Division N, of the Consolidated Appropriations Act, 2021 allows States and political subdivisions, 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 emergency rental assistance (“Section 501 Emergency Rental Assistance”) to households that require financial assistance to pay rent, utilities, home energy expenses, and other related expenses.
Section 501(j) of CAA, 2021 states that Section 501 Emergency Rental Assistance “shall not be regarded as income and shall not be regarded as a resource for purposes of determining the eligibility of the household or any member of the household for benefits or assistance, or the amount or extent of benefits or assistance, under any Federal program…”
Tax issues. The IRS has created a FAQ page addressing tax issues related to Section 501 Emergency Rental Assistance.
Q1: I am a renter who received Section 501 Emergency Rental Assistance payments from a Distributing Entity for use in paying my rent. Are these payments includible in my gross income?
A1: No. Section 501 Emergency Rental Assistance payments made to eligible households are not considered income to members of the household.
Q2: I am a renter who received Section 501 Emergency Rental Assistance payments from a Distributing Entity for use in paying my utilities or home energy expenses. Are these payments includible in my gross income?
A2: No. Section 501 Emergency Rental Assistance payments, including payments for utilities or home energy expenses, made to eligible households are not considered income to members of the household.
Q3: I am a renter who received Section 501 Emergency Rental Assistance from a Distributing Entity for use in paying my rent, utilities, and/or home energy expenses, but the Distributing Entity made the payments directly to my landlord and/or my utility companies on my behalf. Are these payments includible in my gross income?
A3: No. Section 501 Emergency Rental Assistance payments made on behalf of an eligible household are not considered income to members of the household.
Q4: I am a landlord and I have a tenant who qualifies for Section 501 Emergency Rental Assistance. A Distributing Entity sent me a rental payment on my tenant’s behalf under a Section 501 Emergency Rental Assistance program. Is this payment includible in my gross income?
A4: Yes. Rental payments you receive, whether from your tenant or from a Distributing Entity on your tenant’s behalf through a Section 501 Emergency Rental Assistance program, are includible in your gross income.
Q5: I run a utility company that has a customer who qualifies for Section 501 Emergency Rental Assistance. A Distributing Entity sent my company a utility payment on my customer’s behalf under a Section 501 Emergency Rental Assistance program. Is this payment includible in my company’s gross income?
A5: Yes. Utility payments your company receives, whether from a customer or from a Distributing Entity on the customer’s behalf through a Section 501 Emergency Rental Assistance program, are includible in your company’s gross income.
Source: Thompson Reuters 4-2-2021