The CAO must figure out an individual’s monthly profit for the months that the self-employment covers, as follows:
55 Pa. Code § 181.133 55 Pa. Code § 181.272
1. Add the gross earnings from self-employment.
2. Subtract the allowable costs of getting the income.
3. Divide the result by the number of months the income is meant to cover.
The allowable costs for self-employment income are the expenses an individual will pay to run a business or to rent nonresident property.
The CAO must allow deductions for the proven costs of doing business. If the individual does not provide proof of a business expense, the CAO must figure out the profit without allowing a deduction for that expense.
NOTE: When figuring out the profit for an individual who just recently became self-employed, the CAO must estimate the amount of federal, state and local taxes he or she will have to pay.
NOTE: The self-employment tax is not an allowable deduction for MA. The self-employment income used in the MA eligibility decision is taken from IRS Form 1040, Schedule C, Line 31, Net profit or (loss). Schedule C does not allow the self-employment tax.
NOTE: Schedule C does not allow a deduction for health insurance expenses for a self-employed individual. However, it is an allowable deduction for MA if it meets the conditions in Section 361.5 (MNO) or Section 360.6 (NMP).
The following are examples of allowable costs for all categories of MA:
Costs of keeping a place of business, such as rent, maintenance, repairs, utilities, insurance on the business and its property and property taxes
If a business is run in a home, the costs of keeping a place of business are only those costs for that part of the home that is used only for the business.
Interest on the purchase of equipment and property that provides income.
Employee labor costs.
Costs of goods sold, supplies and materials.
Advertising costs.
Accounting and legal fees.
Professional licensing fees and union dues, if they are necessary.
Business transportation.
Other expenses reported on the federal income tax return.
The CAO will also allow deductions for the following expenses for TANF/GA-related categories of MNO:
Personal business and entertainment.
Personal transportation.
Purchase of capital equipment.
Payments on the principal of loans for capital assets or other items that are expected to last a long time.
For MAGI-related MA, all self-employment deductions allowable by the Internal Revenue Service (IRS) can be deducted from an individual's gross self-employment.
NOTE: The CAO should use letter codes A-AF when entering self-employment deductions in eCIS.
If a SSI-related individual reports income from rental property to the IRS, the CAO must figure out the amount of the profit by allowing deductions for the cost of getting the income. (See Section 352.41, Allowable Costs of Getting Self-Employment Income.)
Reminder: If the income is not reported to the IRS, the CAO must count the income as unearned income. (See Chapter 360.3 Unearned Income Deductions- SSI Related, and Chapter 361.3 Unearned Income Deductions- SSI Related for allowable deductions from unearned rental income.)
If a TANF/GA-related individual gets self-employment income from renting out property that he or she doesn’t live in (non-resident property) and the rental is not managed by a third party, then the CAO must figure out the amount of profit by allowing the deductions for the cost of doing business. (See Section 352.41, Allowable Costs of Getting Self-Employment Income.)
If the TANF/GA-related individual gets self-employment income from room and/or board, room rent, or apartment rent in the resident property, the CAO must figure out the profit as follows:
For income from renting out a room or an apartment in the resident property
1. Add the amount of rent being paid.
2. Subtract $10.
3. Subtract 50 % of the amount that is left.
For income from a roomer/boarder for room rent, meals, and utilities:
1. Add the amount of room and board being paid.
2. Subtract 40 % of the amount.
3. Subtract the highest amount that can be used for SNAP for the household size, using the total number of people paying room and board.
For income from a boarder for meals only:
1. Add the amount of board being paid.
2. Subtract the highest amount that can be used for SNAP for the household size, using the total number of boarders.
For income from a combination of renters, boarders, and roomer/boarders in the resident property:
1. From the total rent payments, subtract $10, and then subtract 50% of the amount that is left.
2. From the total room and board payments, subtract 40%.
3. From the board payments and the amount of the room and board payments that are left after the above deductions, subtract the highest amount that can be used for SNAP for the household size, using the total number of boarders and roomer/boarders.
Example: Mrs. Kizer rents two rooms in her home. She has two roomer/boarders and two boarders. She gets $160 a month in room rent, $360 a month in room and board (R&B) payments, and $200 a month in board payments.
|
Total room rent |
$160 |
|
Deduction |
-10 |
|
|
$150 |
|
50% |
-75 |
|
Profit from room rent |
$75 |
|
|
|
|
Total R&B payments |
$360 |
|
40% |
-144 |
|
|
$216 |
|
Board payments |
+200 |
|
|
$416 |
|
Minus SNAP amount for 4 people |
-352 |
|
Profit from R&B and boarders |
$64 |
|
|
|
|
Total profit |
$139 |
Updated May 16, 2019, Replacing September 4, 2018