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DIVISION OF WELFARE AND SUPPORTIVE SERVICES Child Care Policy Manual Capital gain is the financial profit from a sale or transfer of capital assets (accumulated possessions such as products, raw materials, equipment, or ownership of a business). When calculating self-employment income, add any capital gains the household expects to receive during the certification period to determine monthly countable income. Use this amount for the entire certification period unless a new average is computed because the individual received an unanticipated capital gain or a different amount than anticipated. 2. Determine net self-employment income by subtracting allowable costs of producing the income (Examples: labor, sales tax, stock, raw materials, advertisement, insurance premiums, utilities, repairs that maintain income-producing property, supplies, fuel, linen service, property tax and interest from business loans on income-producing property). If receipts, or other expense documentation used for filing taxes, are not provided for expenses, the expense is not allowed. Note: Fuel expenses are not allowed without a detailed mileage record/log or other documentation showing beginning and ending mileage, and destination, which supports the expense. The mileage allowance is based on the current approved standard mileage rates established by the Internal Revenue Service. Do not deduct: • Payments on the principal of loans for income-producing property; • Capital asset purchases, such as real property, equipment, machinery and other durable goods; • Capital asset improvements; • Net loss which occurred in a previous period; • Work-related expenses, such as federal, state and local income taxes, retirement contributions, and travel to and from the place of business; • Depreciation; or • Costs that are not related to self-employment; (e.g., entertainment, personal transportation costs). 306.37.2 Verification of Self-Employment Income Business records and income tax forms are the ideal source of verification. However, if this information is not available or current, use of the Self-Employment Worksheet, form 2011-EG, is acceptable if the income and expenses cannot otherwise be verified by collateral contacts or documentary information. If the applicant claims little or no income, verification of how they are meeting their monthly obligations must be requested via the Request for Information. If the household fails to provide verification, their child care benefits must be denied/terminated. If the household provides the verification and it appears questionable, the case must be referred to Investigations and Recovery Unit (I&R) for an investigation. Do not delay case processing if the case is referred to I&R. The following must be documented in the computer system: • The method used to calculate countable self-employment income; • Deductions for the costs of doing business; • The number of hours engaged in the enterprise; and • Other factors that are used to determine the amount of income. 300- Income and Assets [18] MTL 01/24 July 1, 2024