Income from self-employment is earned income. Self-employment includes, but is not limited to, small business, farming, sales, dressmaking, piecework in the home, roomers, boarders, and rental income received as a result of a client's efforts in
managing the property.
When budgeting self-employment income, a month in which business expenses exceed gross earnings does not equal a loss of earned income for that month.
Money paid by roomers or boarders to self-employed clients who are in the business of renting rooms is earned income.
Verify all self-employment income and business expenses. A self-employed client must keep accurate and complete records of all money received and spent through their self-employment. If the client fails or refuses to keep complete records, the case is
The client's records may serve as proof of income and expenses. Accept the client's records as proof of income and expenses unless the information is questionable. If the information provided by the client is questionable, request additional
Business expenses are the reasonable and necessary costs or expenses of producing self-employment income incurred by the self-employed person. The client has the full responsibility for providing proof of any business expense.
For both Transitional Assistance and Family and Children Assistance, subtract from gross self-employment income any allowable business expenses necessary and directly related to producing goods or services.
What to Allow as a Self-Employment Expense
Allowable self-employment expenses include, but are not limited to:
- purchasing inventory,
- space rental,
- salaries for employees other than the client,
- transportation expenses required for employment, and
- interest on loans for capital assets or durable goods.
What Not to Allow as a Self-Employment Expense
Do not allow the following items as self-employment expenses:
- obsolescence and/or similar losses in the operation of the business;
- personal business costs;
- personal transportation; or
- purchase of capital equipment and payments on the principal of loans for capital assets or durable goods.
NOTE: Capital equipment and/or assets is equipment needed to produce the self-employment goods (e.g. printing press, copy machines, farm machinery, tools, sewing machines, tractors, tow trucks, etc.).
Business Portions of Household Living Expenses
Portions of household living expenses may be an allowable business expense. The allowable expense is the amount of the increased cost due to the business.
Do not count any portion of household living expenses as a business expense when the self-employment activity does not increase the amount of the expenses.
The cost of travel necessary for work is allowable. Allow the actual amount of the expense as verified by the client's records. If a client uses their vehicle for both personal and business purposes, allow a percent of the cost for things like
repairs, tune-ups, etc. as a business expense. Allow a percentage of the bill equal to the percentage of mileage that the vehicle was used for business purposes.