SELF-EMPLOYMENT INCOME

A. An individual involved in a profit making activity shall be classified as self- employed. B. To determine the net profit of a self-employed client, client’s spouse, or sponsor(s), deduct the cost of doing business from the gross income. 1. Cost of doing business expenses include, but are not limited to, the rent of business premises, wholesale cost of merchandise, utilities, interest, taxes, labor, and upkeep of necessary equipment. 2. Depreciation of equipment shall not be considered as a business expense. 3. The cost of and payments on the principal of loans for capital assets or durable goods shall not be considered as a business expense. 4. Personal expenses such as personal income tax payments, meals, and transportation to and from work are not business expenses. C. Some types of self-employment income shall be calculated using a method specific to the type of self-employment, as follows: 1. Farm income shall be considered on a yearly basis. Net income for the prior year shall be determined and averaged for the succeeding year and counted as earned income. When a client, client’s spouse, or sponsor(s) ceases to farm, the income is no longer deducted from the grant standard. 2. Rental income shall be considered as follows: a. When the client, client’s spouse, or sponsor(s) actively manages a self-owned rental property at least twenty (20) hours a week, treat rental income as self-employment income. Average the rental income over a twelve (12) month period to determine monthly earned income. b. Board (to provide a person with regular meals only) payments to the client, client’s spouse, or sponsor(s) shall be considered earned income in the month received. For each boarder, calculate documentable expenses directly related to provision of board. Subtract the result from the board payment to determine the countable earned income. c. Room (to provide a person with lodging only) payments to the client, client’s spouse, or sponsor(s) shall be considered earned income in the month received. For each boarder calculate the documentable expenses directly related to the provision of the room. Subtract the result from the room payment to determine the countable earned income. d. Room and board (to provide a person regular meals and lodging) payments shall be considered earned income in the month received. For each boarder, calculate the documentable expenses directly related to the provision of room and board. Subtract the result from the room and board payment to determine the countable earned income. 3. Appropriate allowances for cost of doing business for a client, client’s spouse, or sponsor(s) who is/are a licensed child care provider are: a. For the first child for whom day care is provided, deduct $55; and, b. For each additional child deduct $22. c. Subtract the total allowances from the documented expenses to determine the earned income. d. If the client, client’s spouse, or sponsor(s) can document a cost of doing business that is greater than the amounts above, the procedure, described in Section 3.520.783.B, shall be used to calculate earned income. D. The net profit amount, secured after the appropriate deductions, is earned income. E. Self-employment verification may consist of tax documents, self-employment ledgers, receipts, or other documents used for verifying and documenting the self-employment income and expenses. If, at the time of the county department’s eligibility determination, a client is recently self-employed or does not have adequate documentation of the self-employment income and expenses, the county department shall use the best information available to determine the monthly income. The client shall be encouraged to keep records of income and expenses for subsequent certifications. No specific verification shall be required and the documentation provided by the client shall be accepted unless questionable. F. All self-employment income shall be considered income in the month received. If receipt of self-employment income is irregular, it shall be averaged over a twelve- month period. The twelve-month period can either be the previous tax year

(January to December) or the most recent twelve-months prior to the application date.