The CAO must determine monthly profit for the period that self-employment covers as follows:
7 CFR § 273.11(a)(2)
1. Total all the expected self-employment income (gross receipts).
2. Add capital gains the household expects to receive.
3. Deduct allowable costs of producing self-employment income.
NOTE: Do not count Depreciation listed on IRS form, Schedule C, Profit or Loss From Business, as it incorporates deductible business expenses not permitted by SNAP regulations. Compare the expenses listed on Schedule C with the costs not allowed as listed below.
4. Divide the result by the number of months over which the income is intended to cover. The result is considered monthly profit.
5. The amount of the monthly profit is then added to any other income received by the household. See Chapter 550, Income, section 550.1.
Allowable costs of producing self-employment income are the day-to-day expenses of operating a business. They do not included the costs of establishing or improving the business.
7 CFR § 273.11(b)
When computing profit, the CAO must allow deductions for the verified costs of doing business. If the household does not verify a business expense, the CAO must determine profit without allowing a deduction for the unverified expense.
The following are examples of allowable costs:
Costs of maintaining a place of business, such as rent, utilities, insurance on the business and its property, and property taxes.
NOTE: If a business is operated in a home, the costs of maintaining a place of business are only those costs identified for the part of the home used exclusively for the business.
Interest on the purchase of income-producing equipment and property.
Payments on the principal of loans for income-producing property or equipment.
Employee labor costs.
Cost of goods sold, supplies, and materials.
Advertising costs.
Accounting and legal fees.
Professional licensing fees and union dues, if they are necessary for practicing a profession or trade.
Transportation costs necessary to produce income.
The following costs are NOT ALLOWABLE:
7 CFR § 273.11(b)
Purchase or improvement of capital assets.
Losses from previous periods.
Current or anticipated losses, except from farm self-employment (see Section 552.53).
Work-related expenses like federal, state, and local income taxes, self-employment tax for Social Security and Medicare contributions, contributions to other retirement funds, transportation to and from work, and the cost of meals away from home (These are expenses that the earned income deduction is intended to cover.)
7 CFR § 273.11(b)(2)(ii)
Deposits into the self-employed individual’s retirement account and payments for his or her life and health insurance.
Personal mileage to and from the place of business.
Income from boarders includes all direct payments to the household for the boarder’s room, meals, and utilities. Shelter expenses paid directly by the boarder to a third party must not be considered income for the household.
7 CFR § 273.11(b)(3)(ii)
NOTE: Shelter expenses paid directly by the boarder to someone outside the household must not be counted when determining the household's income deduction for excess shelter costs.
Example: A boarder is charged $100 a month and must pay the household’s $50 monthly electric bill. The boarder pays the electric company directly. The amount considered income from the boarder is $100 per month.
Profit from boarder payments is computed in the same manner as any other self-employment income.
7 CFR § 273.11(b)(1)(ii)
If a household operates a commercial boarding house, the CAO must use the allowable costs of producing the income. See Section 552.51.
If the household does not operate a commercial boarding house, the CAO must deduct the greater of the following from the income received from boarders:
7 CFR § 273.11(b)(3)(ii)
The maximum benefit for a household size that is equal to the number of boarders (two-thirds of the maximum benefit if less than three meals per day are provided); or
The verified actual separate and identifiable costs of providing room and meals, if the actual costs are greater than the maximum monthly benefit for the number of boarders.
NOTE: The cost may not exceed the total boarder payments for lodging and meals.
A loss occurs when the cost of producing self-employment income is greater than the income received (total gross receipts) from farm self-employment.
7 CFR § 273.11(a)(2)(ii)
Losses from self-employment other than farming must never be used to offset other household income.
Losses from farm self-employment can be used to offset other household income, but only if the yearly gross receipts from farm self-employment are expected to be at least $1,000.
7 CFR § 273.11(a)(2)(ii)(A) & (B)
NOTE: If gross receipts from farm self-employment are expected to be less than $1,000, the loss must not be used to offset other household income.
Losses from previous periods must never be used to offset current income. Only losses expected to occur during the period for which income is being determined (usually 12 months for farm self-employment) are used to offset other household income.
The CAO must use the Self-Employment Income screen in eCIS to record the following information:
Total gross receipts—Enter the amount of the total gross receipts for the period income is being determined.
Total expenses—Enter the allowable deductions for expenses for the same period.
The CAO must determine the estimated gross monthly income from farming.
If the household has nonfarm self-employment, subtract any monthly loss from the monthly total gross income received from the nonfarm self-employment.
The Disaster Act of 1988 (Pub. L. 100-387) provides payment to farmers adversely affected by the drought. Those payments are for crop losses and the purchase of feed grain and are considered earned income. They are never considered a resource. The CAO must count these payments according to the normal annualizing procedures for self-employment income in Section 552.3.
7 CFR § 273.9(b)
NOTE: The feed-grain payments must be offset by allowing the household to claim the purchase of feed grain as a cost of doing business. See Section 552.51.
Reissued March 1, 2012, replacing July 13, 2004