Page 13

12

employment income exceed the actual income, the countable SE income is $0 rather than a negative number. - For MED 3: Self-employment business losses cannot be used to offset or reduce other, non-self-employment income (i.e. wages). If the costs of producing self-employment income exceed the actual income, the countable SE income is $0 rather than a negative number.

Since MAGI is based on tax information, business losses: 1. Can only be applied to the income of the business itself if no tax return is furnished. 2. Can only be applied to income present on the same tax return if the tax return is furnished. • A job started after that tax return was filed or was for a person not included on the return should not have any loss deducted 3. Can in no case reduce the income to less than $0. 4. Can be used to offset spouse’s wages when individuals file a joint return.4 Note: A tax filer can claim a net loss from self-employment to offset other income reported on the IRS form 1040, except for countable Retirement, Survivors, and Disability Insurance (RSDI) benefits, non-taxable interest, and foreign earned income. If a tax return is furnished to verify household income, the Adjusted Gross Income (AGI) located on Form- 1040 of that return should be used as the member’s income. The Adjusted Gross Income includes all sources of taxable income for the tax household, with allowed deductions already subtracted (including self-employment and all other income shown on separate tax schedules). AGI should always be used in the calculation of MAGI income when it is available and current. The Adjusted Gross Income Line found on the Form-1040 is unique to that tax year, therefore it is important that the correct line is used. The AGI line will include in the description: This is your Adjusted Gross Income. If the worker is still unsure which line is correct, the IRS website (www.irs.gov) can be used to confirm current and prior tax schedules including the line number which contains AGI information. If the tax return includes MAGI exceptions for income (child support, veteran’s benefits, etc.) or there are other questions, the worker can send the information to the policy answer line (PAL) to verify how to enter the information.