Self-employment income is calculated by subtracting the cost of doing business from the gross income or "profit" from the business, but before subtracting FICA or income taxes. Self-employment income can come from a private enterprise as well as private contracting or sub-contracting work where you provide services for a government or private agency, such as a home-based day care. Identifying all your business expenses can make a big difference in lowering your countable income for SNAP purposes.

Examples of self-employment business expenses include

• rent and utilities you pay for your business space (including a portion of the costs of your home if you have an at-home business);
• rental of equipment (such as a taxi, tractor, boat, beauty salon equipment);
• costs of supplies, such as food or toys provided in a day care setting, cleaning supplies for housekeeping, products for a beauty salon, etc.;
• wages you pay to other employees;
• stock or inventory;
• raw materials used to make a product, including seed and fertilizer;
• mortgage (including the principal), interest, and taxes paid on income-producing property;
• advertisement costs;
• repairs and replacement of equipment;
• legal and accounting fees, licenses (such as a day care license) and permits to operate the business;
• phones, computers, postage meters, paper and other business supplies.

See 106 C.M.R. § 365.940. If these expenses are verified, DTA will allow them as part of the costs of doing business in calculating your countable gross income before the 20% earned income deduction.

Example: June sells cosmetics from her home. She buys the product from the manufacturer and then sells it to her customers. She can deduct the amount that she paid for the cosmetics and her costs of reaching customers (phone, mailing costs, website) from any income that she earns from selling the cosmetics.

Example: Sarah provides day care in her own home. Because she has young children inside most of the day, she pays more for oil and electricity to heat her home than she would otherwise use. Sarah also buys food for snacks and diapers, and pays a day care license. A portion of her heat/utility costs can be claimed as a business expense, as well as the cost of snacks, and other supplies for her business.

You can also claim business expenses incurred before you applied for SNAP benefits. 106 C.M.R. § 365.030(B). However, you cannot claim net losses on your business or the money you set aside for income tax or retirement funds (which expenses are considered part of the 20% earnings disregard). 106 C.M.R. § 365.950.

Rental income is treated as unearned income unless you spend least 20 hours a week managing the property. 106 C.M.R. §§ 363.220(B)(5), 365.930(A). See Question 47 (What is unearned income?) on how to calculate net rental income.

Averaging self-employment income

Self-employment is usually averaged over a 12-month period unless the income is intended for a shorter period (e.g., summer income), or you tell your worker you wish to have it cover a shorter period of time because of anticipated changes. 106 C.M.R. §§ 364.340(B), 365.960. If you report that there has been a major change in your self-employment for the current year, DTA should not use the prior year tax returns.

After DTA determines your pre-tax "gross" monthly self-employment income, after business expenses, DTA deducts 20% of that gross as an earnings disregard— just like if you had regular wages or employment. 106 C.M.R. § 364.400(B).

Example: Millie earned $10,000 last year, after expenses, from her taxi service. Millie does not expect this income to change this year. DTA will average this $10,000 over 12 months to get a monthly figure of $833 per month "gross" income. DTA then subtracts 20% earnings disregard from this gross figure, which reduces her earned income to $667 per month (and then other deductions apply).

Reporting changes for self-employment households

Self-employed households are usually put on "change reporting" because the income is often unsteady and fluctuates. 106 C.M.R § 366.110(C)(1)(e). See also Question 75: When do I have to report changes if I am on change reporting?. Change reporting does not require you to report every change, but you must report changes that will affect the amount DTA has averaged as income for your certification period.  So, if you experience an unusual or unanticipated change in business net income or expenses, you need to report this change within 10 days to DTA.