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Effective: December 1, 2006 |
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20.25.15.10ar1 - MA/GAMC Self-Employment Income (Archive) |
Archived: April 1, 2009 |
Calculating countable self-employment income for MA and GAMC differs for each method used. Some deductions from self-employment income are allowed and others are not.
Use tax forms or business records if tax forms are not available to determine the countable self-employment income. The countable self-employment income is generally the gross receipts minus business expenses.
Note: See Self-Employment Income for information on how to determine countable income when there has been a substantial change.
This section provides more specific information on what deductions are or are not allowed in calculating the countable self-employment income for MA and GAMC. Additional general guidelines are found in Self-Employment Income.
Specific Types of Self-Employment Income.
Capital gains or losses result from the sale or exchange of business or personal asset.
Capital expenditures are payments made to purchase or improve property with a useful life of more than one year.
Carry Forward Net Operating Loss (NOL).
When allowable business deductions exceed gross receipts for the tax year, the business has incurred a loss that may be carried over into future years.
Depreciation is a deduction for the cost of a business asset that gradually loses value through the wear and tear of use.
A substantial change is a change in income from what a household reported on the previous year’s tax forms.
Follow these rules when calculating the MA Method A countable self-employment income:
l Count capital gains and losses if they are part of the self-employment operation.
Note: If they can be distinguished from other business income, count them only if the household expects similar gains or losses in the coming year.
l If an applicant or enrollee operates more than one self-employment business, deduct a loss from one business from any profit of a second business.
l Certain business expenses are not allowed as deductions from self-employment income for MA Method A purposes. These deductions found on the tax return or in business records should be added to the net profit or loss of the business before completing the MA income calculation.
The following expenses are not allowed as a business deduction:
l Carry over net operating loss (NOL) from a previous tax year.
l Personal federal, state, and local income taxes.
l The self-employed client's share of FICA.
Note: Allow the employer's share of FICA payments made for employees who are not members of the MA or GAMC household.
l Money set aside for the self-employed person's own retirement.
l Work-related personal expenses.
l Payments on principal of loans.
Note: Allow interest payments as a self-employment expense.
l Capital expenditures.
l Charitable contributions.
l Depreciation.
l Wages or other benefits paid to a member of the MA or GAMC household, regardless of whether that person is applying for or receiving MA or GAMC.
l Any expenses not allowed by the IRS, unless specifically authorized by this manual.
l The costs of building an inventory.
Note: Deduct the cost of a product only after it sells.
l Personal business and entertainment expenses.
Follow these rules when calculating the Method B countable self-employment income:
l Do not deduct expenses the IRS does not allow as a self-employment expense.
Note: Add any expenses not allowed by the IRS back into the total profit or loss.
l Deduct a self-employment loss from other household earned income.
Specific Types of Self-Employment Income
For instructions on how to treat specific types of self-employment, see: