Self-employment income is calculated by taking the gross earned income from self-employment and deducting either the actual costs of self-employment or 40 percent of the gross earned income from self-employment. [MPP § 63-503.413.] The recipient chooses whether to deduct actual costs or 40 percent of gross earned income. [Id.] The recipient can change whether to deduct actual costs or 40 percent of gross earned income every six months at their semi-annual review.
Actual allowable costs of self-employment include, but are not limited to identifiable costs of labor, stock, raw material, seed and fertilizer; payments on the principal of the purchase price of income-producing real estate and capital assets, equipment, machinery, and other durable goods; interest paid to purchase income producing property, insurance premiums, and taxes paid on income producing property. [MPP § 63-503.413(a).] Allowable costs do not include net losses from previous periods; federal, state and local income taxes, retirement contributions; and other work-related expenses such as transportation; depreciation; and any amount that exceeds the payment a household receives from a border for lodging and meals. [MPP § 63-503.413(b).]
If self-employment income is received monthly, the actual amount of income is used. [MPP § 63-503.412(b).] If self-employment income is received less than monthly, it is averaged over the period of time the income is intended to cover. [Id.] At the time of application, income and expenses from self employment are verified either for the past year or for last period income was earned and intended to cover. [MPP § 63-503.412(a).] If the household experiences a substantial increase or decrease in self-employment income and can verify the average amount does not reflect the household’s actual circumstances, the county calculates self-employment income based on actual earnings. [MPP § 63-503.412(a)(1).]
Proceeds from the sale of capital goods are included as self-employment income in the same manner as a capital gain for federal income tax purposes. [MPP § 63-503.414.]
Total household income is determined by adding net self-employment income to any other earned income the household receives. [MPP § 63-503.415.] Note that the 20 percent earned income disregard is taken from the total net household income, including net self-employment income. [See § MPP 63-503.416(1) (calculation example).]
If the household is eligible based on net monthly income, the county can offer to determine the benefit level either by using the net income used to determine eligibility or by prorating the household’s total net income over the period for which the household’s self-employment income was averaged. [MPP § 63-503.416.]