Procedure # 8 - Procedure for Calculating Self-Employment Income

July 2001

1.Average self-employment income over the period of time the income is intended to cover. If the averaged amount does not accurately reflect the actual circumstances (due to a substantial increase or decrease) calculate the self-employment income on the basis of anticipated earnings.

2.If the enterprise has existed for less than a year, the self-employment income must be averaged over the period of time the business has been in operation and the amount projected over the coming year.

3.Determine monthly self-employment income.

  • Add all gross self-employment income (actual or anticipated).
  • Add any capital gains (actual or anticipated).
  • Deduct costs of producing the self-employment income which includes (but is not limited to):
  • Identifiable costs of labor, stock, raw material (including seed and fertilizer),
  • Principal and/or interest payments on the purchase price of income-producing real estate and capital assets, equipment, machinery and other durable goods,
  • Insurance premiums of real estate, equipment, or other income producing property,
  • Property or similar taxes on income-producing property (do not deduct income or social security taxes as these are accounted for in the earned income deduction), and
  • Any other identifiable cost of producing that particular AG's self-employment enterprise including separate and identifiable costs of a home used in the self-employment enterprise.
  • Divide the remaining amount of the income by the number of months over which the income is being averaged. THIS AMOUNT IS THE MONTHLY NET SELF-EMPLOYMENT INCOME AND MUST BE ADDED TO ANY OTHER EARNED INCOME RECEIVED BY THE AG.

4.If the cost of producing the income exceeds the income derived (as in the case of a farmer who receives or anticipates to receive $1,000 or more from the farming enterprise), losses must be prorated to a monthly amount.

  • Offset farm loses first against other self-employment income.
  • Offset remaining farm self-employment losses again the total amount of earned and unearned income AFTER the 20% earned income deduction has been applied.

5.Complete the eligibility determination as for any other AG. Shelter costs deducted as a cost of doing business cannot be allowed as part of the AG's other shelter costs.