Example 6
Income from a self-employment farming operation and another self-employment enterprise are the AG's only sources of income. The offsetting of any farm loss and the determination of the earned income deduction are as follows.
| $10,000 | total annual income from farming operation |
| - 11,000 | allowable business costs |
| $(1,000) | farm loss to be offset against other self-employment |
| $ 8,000 | total annual income from other self-employment enterprise |
| - 2,200 | allowable business costs |
| $ 5,800 | income from other self-employment enterprise after allowable business expenses |
| - 1,000 | loss from farming operation |
| $ 4,800 | total annual net profits (countable gross income) |
| $ 4,800 | divided by 12 = $400 gross monthly income from self-employment |
| $ 400 | gross monthly self-employment |
| x . 20
| |
| $ 80 | is the monthly earned income deduction |
$400 gross monthly income minus $80 monthly earned income deduction minus other deductions equal the monthly net (adjusted) income.
Example 7
The AG has income from a self-employment farming operation, a self-employment operation which is not related to farming, wages ($800 per month), and unearned income ($500 per month). How is offsetting done and how is the earned income deduction calculated? Answer: Any loss from the farming operation would be offset against other sources of income in the order listed above.
| $ 20,000 | total annual income from farming operation |
| - 30,000 | allowable business costs |
| $ (10,000) | annual farm loss to be offset against other self-employment |
| $ 8,000 | total annual income from other self-employment enterprise |
| - 2,200 | annual allowable business costs |
| $ 5,800 | income from other self-employment enterprise after allowable business expenses |
| - 5,800 | annual losses from farming operation ($5,800 of $10,000 in losses) |
| $ 0 | total annual net profits from self-employment (countable income) |
*At this point the AG still has $4,200 per year in losses from the farming operation that can be used to offset earned and unearned income.
| $ 800 | monthly income from wages |
| - 350 | monthly losses from farming operation ($4,200 divided by 12 months) |
| $ 450 | monthly income from wages which is countable in determining eligibility |
* The entire loss from the farming operation has been used. There is no farm loss remaining to reduce the AG's unearned income.
| $ 450 | monthly income (from wages) remaining after offsetting |
| x .20 | |
| $ 90 | earned income deduction |
$950 ($450 from wages after offsetting is completed and $500 unearned income) gross monthly income minus $90 monthly earned income deduction minus other deductions equal monthly net (adjusted) income.