How to Calculate the Rent Based on Income

by Carter McBride ; Updated September 11, 2015
Rental payments can be based on the amount of income a person makes.

There are several ways to design a rental contract to determine the amount of payments a tenant must make. These range from paying a monthly or yearly fee to paying based on a percentage of income. The U.S. Department of Housing and Urban Development (HUD) offers the HOME program which determines rent based on the ability to pay. The HOME program allows recipients to pay 30 percent of their adjusted income as rent.

Determine the renter's adjusted income. Different programs have different definitions of income; and when negotiating and writing a rental agreement, the contract should define the term "adjusted income." As an example, a renter has adjusted income for the year of $24,000.

Determine the percentage of income on which to base the rental payments. This percentage should be explicit in the rental income agreement. In the example, the HOME program is based on 30 percent of adjusted income.

Multiply the adjusted income by the percentage of income to determine rental payments. In our example, $24,000 times 30 percent equals a yearly rental payment of $7,200 or $600 a month.

About the Author

Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.

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