What expense is considered not allowable when calculating a net income statement?

When calculating a net income statement, allowable expenses typically refer to costs that are necessary for the operation and maintenance of the property, which reduce the taxable income. The mortgage payment, however, is generally not considered an allowable expense in this context.

Mortgage payments consist of both principal and interest components. While the interest portion may be deductible, the principal repayment does not reduce the taxable income for the purposes of determining net income. Instead, it is seen as a reduction of liability rather than an operating expense.

In contrast, property management fees, utilities, and insurance premiums are all expenses directly related to the property's operation and maintenance. They directly impact the cash flow and are considered necessary costs for maintaining the property, making them allowable when calculating net income. Thus, mortgage payments do not fit within the framework of allowable operating expenses, as they fundamentally differ in nature by involving financing rather than operational costs.