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Families and Children Manual Policy Manual Number: 010.020 Section: Financial Eligibility Chapter: Countable and Excluded Income

September 1, 2026 Division of Tenncare 4 ii. Allowable Deductions Net income is the gross income from any trade or business minus allowable deductions for that trade or business. Allowable deductions include expenses paid to operate the business or participate in the trade, including: 1. Car and truck expenses; 2. Depreciation; 3. Employee wages and fringe benefits; 4. Property, liability or business interruption insurance; 5. Interest on business loans; 6. Legal and professional services; 7. Rent or lease of business property and utilities; 8. Commissions, taxes, licenses and fees; 9. Advertising; 10. Contract labor; and 11. Repairs and maintenance. iii. Business Structures There are different types of self-employment business structures. Some common structures include: 1. Sole Proprietorships: A self-employment business that is not incorporated and has one or two owners. A Limited Liability company (LLC) is not a sole proprietorship;

2. Independent Contractors: An individual who pays her own employment taxes and does not have an employee/employer relationship is considered self-employed, unless incorporated or an LLC; and

3. Sharecroppers: If a sharecropper pays the costs of doing business and receives a portion of the net income in exchange for her labor, she is considered self-employed, unless incorporated or an LLC. If an individual is self-employed and has a partner or is a joint owner of a business, the individual’s self-employment net earnings will be based on her distributive share from the business. iv. Federal Income Tax Return Forms 1. Net Earnings from Self-Employment (NESE)

Self-employed individuals report their NESE on the Schedule SE tax form. Other forms may be used to report income (Schedule C, Schedule F, etc.) but the amount listed on Schedule SE should be used to verify self-employment earnings whenever possible.