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Revision 09-4; Effective December 1, 2009
Net earnings (gross income less allowable deductions) are used in budgeting. Net earnings from self-employment also include any profit or loss incurred in partnership agreements (within a self-employment related context). Verified net losses from self-employment can be deducted from other earned income received in the same year the loss was incurred.
In a couple case, the loss can be deducted from either spouse's earned income, regardless of which spouse incurred the loss.
Losses cannot be deducted from unearned income or carried over from a previous period.
E-6210 Self-Employment Expenses
Revision 24-2; Effective June 1, 2024
The chart below lists common types of self-employment expenses. This chart is not all-inclusive. Submit Form H0005, Policy Clarification Request, when questionable deductions arise or to determine how to budget self-employment expenses not listed in the chart.
Self-Employment Expenses
Allowable self-employment expenses are based on costs that can be deducted from federal income taxes per the IRS Schedule C, Form 1040 - Profit or Loss from Business.
| Expense Types | MEPD Programs |
|---|---|
| Advertising | Allowed |
| Car and truck expenses | Allowed |
| Commissions and fees | Allowed |
| Contract labor | Allowed |
| Costs not related to self-employment | Non-Allowed |
| Costs related to producing income gained from illegal activities, such as prostitution or the sale of illegal drugs | Non-Allowed |
| Depletion | Allowed |
| Depreciation | Allowed |
| Employee benefit programs | Allowed |
| Insurance | Allowed |
| Interest * | Allowed |
| Legal and professional services | Allowed |
| Net loss that occurred in a previous period | Non-Allowed |
| Office expenses | Allowed |
| Pension and profit-sharing plans | Allowed |
| Rent or lease ** | Allowed |
| Repairs and maintenance | Allowed |
| Supplies | Allowed |
| Taxes and licenses | Allowed |
| Travel, meals and entertainment | Allowed |
| Travel to and from place of business | Non-Allowed |
| Utilities | Allowed |
| Wages | Allowed |
| Other expenses | Allowed |
*Interest includes mortgage, interest paid to banks and other interest.
**Rent or lease may include rental of vehicles, machinery, equipment or other business property.
When determining transportation costs, the person may choose to use the standard mileage reimbursement rate of 67 cents per mile instead of keeping track of actual expenses.
The IRS Schedule F, Form 1040 - Profit or Loss from Farming, lists the deductible expenses for farm income.