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Title 8: Medicaid Page 54 Iowa Department of Health and Human Services Employees’ Manual Chapter E: Income Non-MAGI-Related Self-Employment Revised April 11, 2025 Determining if a Client is Self-Employed If the person does not file form SE, but claims to be self-employed, determine if the person would be subject to the self-employment tax if the person filed an income tax return. Consult the IRS or another knowledgeable source to determine if the person is self-employed. Ask if the person materially participates in the management decisions. If the person does, this may be self-employment. Renting out one or two properties or leasing farmland to someone is not necessarily self-employment. In such cases, determine whether the person’s business is renting those properties by requesting a complete copy of the person’s federal tax return. See also Rental Property or Life Estate Income.

1. Mr. X rents out his life estate on the farm that he previously owned. He does not manage a business. Therefore, Mr. X does not engage in self- employment. 2. Mr. J files a Medicaid application for his daughter. He states that he is a self-employed salesman. The IM worker gets a release of information and contacts his distributor, who confirms that Mr. J is self-employed. 3. Ms. E babysits in her home. She does not file an income tax return. She is responsible for all expenses and makes her own management decisions. She is self-employed. Determining Income from Self-Employment Legal reference: 20 CFR 416.1110, 20 CFR 416.1111 “Self-employment income” is the gross income from a trade or business minus allowable deductions for that trade or business. Annualize self-employment income on a taxable year basis by totaling all self- employment income received or projected to be received in the calendar year, then dividing the total by 12 to determine the monthly amount. Divide the entire taxable year’s self-employment income equally among the number of months in the taxable year, even if the business:  Is seasonal.  Starts during the year.  Stops operating before the end of the taxable year.  Stops operating before the application for assistance.