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Subsidized Child Care Assistance Program Policy Manual Chapter 7. Family Definition and Determining Income Eligibility Revised 08/01/2024

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of goods sold", this will result in line 7 being less than line 1. In this case, the higher amount on line 1 should be used as gross income, as the Cost of Goods sold on line 4 should be considered an expense. The child care worker should use the higher amount from either line 1 or line 7. If there are costs of goods sold, this amount should be used as an expense deduction (along with expenses from Part II) as shown in the example above.

2. Expenses Operational expenses are the cost of carrying on a trade or business. To be deductible, an operational expense must relate to or pertain to a trade or business and be both ordinary and necessary. An ordinary expense is one that is common and accepted in the trade or business. A necessary expense is one that is helpful and appropriate for the trade or business.

A deduction from gross income receipts of a business will be allowed for the ordinary and necessary expenses required for the operation of the business. The individual is automatically eligible for the 20%, which is automated in NC FAST once the child care worker enters the Gross Receipts Evidence. If the recipient has operational expenses greater than the standard 20% deduction, the operational expenses must be verified to be considered a deduction from self-employment income. If a self- employed individual provides their income taxes, the child care worker must use that as expense verification to offer more than 20% deduction, if applicable. Child care workers must enter correct and accurate information into NC FAST. If the applicant/recipient requests an expense deduction greater than the standard 20%, the applicant/recipient must provide verification of the expenses and the worker must enter the expenses in the Expense Evidence in NC FAST. If Expense Evidence is entered in NC FAST that exceeds