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Child Care Assistance Program Policy Manual Issued 07/2023 Self-employment income 6.6.5 • Capital gains. See Chapter 6.15.12 (Annualizing Farm Income). Roomer/boarder income When the family owns a home and is renting all or a portion of the home to someone else, this is considered rental income. The family may or may not also be residing in the same home. See Chapter 6.15.9 (Annualizing Rental Property Income). When the family rents a home from someone else, lives at the same home, and also rents rooms or a portion of the home out to someone else, this is considered self-employment from a roomer or a boarder and is counted as earned income. A roomer lives with the family and pays for lodging only. A boarder eats with the family and pays for meals only. A roomer and boarder lives and eats with the family and pays for lodging and meals. See Chapter 6.15.6 (Annualizing self-employment income) for information about annualizing roomer/boarder income. Self-employment ownership types Self-employed people may own a business solely or in partnership. Sole proprietorship A sole proprietorship is an unincorporated business with only one owner who pays personal income tax on profits earned. A sole proprietorship may also be referred to as a sole trader or proprietorship. In a sole proprietorship, the owner is: • Inseparable from the business • The recipient of all profits • Financially and legally responsible for all debts and legal actions regarding the business • Responsible for tax liabilities which are determined at the personal income tax rate. A sole proprietorship when both spouses in a marriage carry on the trade or business is known as a qualified joint venture. Generally, a qualified joint venture whose only members are a married couple filing a joint return is permitted to not be treated as a partnership for Federal tax purposes. All items of income, gain, loss, deduction and credit are divided between the spouses in accordance with their respective interests in the venture. Each spouse takes into account their respective share of these items as a sole proprietor. A sole proprietorship must report their business income as part of their 1040 using schedule C, E or F. Partnerships A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each partner contributes money, property, labor or skill, and expects to share in the profits and losses of the business. A partnership contract spells out the manner in which profits are to be distributed.