*** The Health Care Programs Manual (HCPM) has been replaced by the Minnesota Health Care Programs Eligibility Policy Manual (EPM) as of June 1, 2016. Please refer to the EPM for current health care program policy information. ***
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Effective: May 1, 2012 |
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20.25.20.05 - MinnesotaCare Self-Employment Income |
Archived: June 1, 2016 (Previous Versions) |
Calculating self-employment income for MinnesotaCare differs for non-farm self-employed and farm self-employed businesses. Some deductions from self-employment income are allowed and others are not.
This section provides information on how to calculate the self-employment income for MinnesotaCare. Additional general self-employment income information can be found in Self-Employment Income.
MinnesotaCare Self-Employment Tools.
General Self-Employment Income Calculation.
Partnerships and S-Corporation Calculation.
Use the MinnesotaCare Income Worksheet (DHS-3352) and the chart below to help identify where to find required information on the tax forms, and as a guide through the calculation.
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Type of Self-Employment |
Tax Forms Required |
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Sole Proprietor |
l 1040 U.S. Individual Income Tax Return (including all W-2s) l Schedule C (Form 1040), Profit or Loss from Business l Form 4562, Depreciation and Amortization, if filed l Form 8829, Expenses for Business Use of Your Home, if filed |
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Farm (Sole Proprietor) |
l 1040 U.S. Individual Income Tax Return (including all W-2s) |
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Rental Real Estate |
l 1040 U.S. Individual Income Tax Return (including all W-2s) l Schedule E (Form 1040), Supplemental Income and Loss l Form 4562, Depreciation and Amortization, if filed l Form 8825, Rental Real Estate Income & Expenses of a Partnership or S-Corporation, if filed |
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Partnership |
l 1040 U.S. Individual Income Tax Return (including all W-2s) l Schedule E (Form 1040), Supplemental Income and Loss l Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc. l Form 1065 (U.S. Return of Partnership Income) |
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Farm (Partnership) |
l 1040 U.S. Individual Income Tax Return (including all W-2s) |
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S-Corporation |
l 1040 U.S. Individual Income Tax Return (including all W-2s) l Schedule E (Form 1040), Supplemental Income and Loss l Schedule K-1 (Form 1120S), Partner’s Share of Income, Deductions, Credits, etc. l Form 1120S (U.S. Income Tax return for an S-Corporation) |
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Farm (S-Corporation) |
l 1040 U.S. Individual Income Tax Return (including all W-2s) |
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Farm Rental |
l 1040 U.S. Individual Income Tax Return (including all W-2s) |
Note: Do not require an applicant or enrollee to provide a W-2 with his or her taxes if the W-2 will not be used to verify wage income.
General Self-Employment Income Calculation
Both self-employment and farm self-employment income use as the baseline the adjusted gross income reported on the applicant’s or enrollee’s 1040 federal income tax form for the previous year.
1. Calculate self-employment income for the 12-month period of eligibility by adding depreciation and net operating loss carryover amounts that apply to the business to the adjusted gross income.
2. Calculate farm self-employment income for the 12-month period of eligibility using the adjusted gross income. Do not add back depreciation or the net operating loss carryover amounts.
3. For both self-employment and farm self-employment income:
n Subtract wages and duplicative unearned income unrelated to the self-employment income.
n Do not add or subtract additional deductions or expenses from the tax forms.
n Do not add back amortization .
n Do not add back capital gains.
C-corporation shareholders receive profits in the form of dividends. Shareholders who perform work for the corporation are paid as employees and receive wages. Use the dividends and individual wages to compute C-corporation income. See Interest and Dividends and Determining Gross Income - MinnesotaCare for more information.
Partnerships and S-Corporations Calculation
The income calculation for a person self-employed by a partnership or S-Corporation follows the general provisions above.
Determine the percentage of each person's share of profit, deductions, and loss. This will vary depending on the percentage of the business they own. To determine the percentage if the K-1 Form is:
l Provided: Use the percentage shown on the K-1 form to determine the individual’s share of depreciation.
l Not provided: Use the terms of the original partnership or corporate agreement to determine the applicant's percentage.
Example:
George, a MinnesotaCare applicant, is a partner in a small business with Sam. Because Sam contributed a larger share of the initial investment, and both work full-time for the business, Sam owns 60% of the partnership while George owns 40%. Each receives a K-1 form showing his share of the partnership's income. The partnership's tax forms show a $5,000 depreciation deduction.
Action:
Add $2,000 (40% of $5,000) to George's adjusted gross income.