9074.2 Self-Employment Standard Deduction for Producing Income

The cost for producing income is a standard deduction of the gross income. This standard deduction is a percentage of the gross income determined annually and is listed in the Cost-of-Living Adjustment (COLA) notice each October. The standard deduction is considered the cost to produce income. The gross income test is applied after the standard deduction. The 20% earned income deduction is then applied to the net self-employment income and any other earned income in the household. The standard deduction applies to all self-employed households with costs to produce income. To receive the standard deduction, self-employed households must provide and verify they have business costs to produce income. The verifications can include, but are not limited to, tax records, ledgers, business records, receipts, check receipts, and business statements. The self-employed household does not have to verify all its business costs to receive the standard deduction. Self-employed households not claiming or verifying any costs to produce income will not receive the standard deduction. The self-employment standard deduction will be reviewed annually to determine if an adjustment in the percentage amount is needed. 9 DE Reg. 564 (10/01/05)