The following discussion regarding offsetting refers to earned self-employment income only. Unearned self-employment income cannot be offset.
FAMIS combines all earned self-employment income to determine the gross income/proceeds derived from self-employment. All expenses of producing this self-employment income are combined to determine the total expense of producing the self-employment income. This includes farm and non-farm self-employment income. Losses from one earned self-employment enterprise may offset income from another self-employment enterprise. However, losses from non-farm self-employment cannot be offset against other types of non-self-employment income.
If the loss shown is from farming self-employment, the farm loss is deducted from other non-self-employment income.
To be considered a self-employed farmer, the farming operation must show proceeds of $1,000 within the year (source code FA). The $1,000 in proceeds is the amount considered prior to applying any expense of producing the farm income.
EXAMPLE: The farmer sells $2,000 worth of livestock. The cost for livestock feed is $1,200 and the cost of veterinary services is $1,000. The farming operation has gross proceeds of at least $1,000. The farm operation shows a loss because the expense of producing ($2,200) is greater than the income ($2,000).
If the proceeds are less than $1,000 use source code FM. FAMIS uses the source codes to determine if there is a farm loss.
EXAMPLE: Farm and Non-Farm Self-Employment Loss
| FARM | NON-FARM |
| Self-employment Income 1,000 | Self-employment income 1,000 |
| Expense of producing 1,200 | Farm income -0- |
| Profit -0- | Total income 1,000 |
| Net loss -200 | Expense of producing 1,100 |
| Profit/net loss -100 | |
| Net farm loss -200 |
The $100 loss from non-farm self-employment cannot be subtracted from other non-self-employment income. Only the $200 farm loss can be offset from other non-self-employment income.
EXAMPLE: Non-Farm Self-Employment Loss
| FARM | NON-FARM |
| Self-employment Income 1,000 | Self-employment income 1,000 |
| Expense of producing 900 | Farm income 100 |
| Profit 100 | Total income 1,100 |
| Net loss -0- | Expense of producing 1,200 |
| Profit loss -100 |
In this example, no offsetting is made from other non-self-employment income. The loss shown is from non-self-employment.
EXAMPLE: Farm Loss and Non-Farm Self-Employment Profit
| FARM | NON-FARM |
| Self-employment Income 1,000 | Self-employment income 1,000 |
| Expense of producing 2,000 | Farm income -0- |
| Profit -0- | Total income 1,000 |
| Net loss -1,000 | Expense of producing 500 |
| Profit/loss +500 | |
| Farm loss -1,000 | |
| Net farm loss -500 |
In this example, the net farm loss of $500 is offset from other non-self-employment income.
Consider farm loss as follows:
- Determine income amount using appropriate tax forms and enter the appropriate information.
- Determine total gross EARNED income from all other sources.
- Determine total UNEARNED income from all sources.
- Add the total EARNED and total UNEARNED income.
- Apply the EARNED income deduction.
- Subtract the total amount of the farm loss.
- For non-elderly/disabled households, use the income amount, after subtracting the farm loss, to determine if the household is eligible on gross income.
- Use the income amount, after subtracting the farm loss, in calculating net adjusted income using appropriate deductions.