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Do You Have to Pay Taxes on Emergency Rental Assistance?

To protect Americans from the loss of basic housing security due to the devastating impact of COVID-19, two emergency funding programs have been assisting households unable to pay rent or utilities.

The first Emergency Rental Assistance (ERA1) program set aside $25 billion on December 27, 2020 through the Consolidated Appropriations Act. An additional $21.55 billion was made available in Emergency Rental Assistance (ERA2) on March 11, 2021 under the American Rescue Plan Act of 2021.

Distribution of Funds
The funds go directly to states, U.S. territories, and local governments and are then disbursed as direct financial assistance to pay for rent, rental arrears, utilities and home energy costs, utilities, and home energy costs arrears and other expenses related to housing. ERA1 funds are set to expire on September 30, 2022 and ERA2 funds on September 30, 2025.

ERA Fund Taxation
To clarify whether funds provided through the ERA1 and the ERA2 are taxable, the Internal Revenue Service (IRS) posted answers to frequently asked questions (FAQs) on their website on May 18, 2021.

For renters, the answer is no. ERA payments to renters are not considered income. That includes payments made on their behalf which are paid directly to landlords.

For landlords, however, the FAQs specify that rental and utility payments made through ERA funding are includible in gross income. The same applies to utility companies receiving ERA funding for a customer who qualifies.

Link to FAQs
To access the FAQs related to ERA funding, click here: https://www.irs.gov/newsroom/emergency-rental-assistance-frequently-asked-questions#:~:text=No.,to%20members%20of%20the%20household

Continue to check the Herbein website for further updates or reach out to your Herbein advisor at info@herbein.com.