Food Stamps

1115.040.10 Losses from Self-employment Income

IM-#88  October 4, 2006

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.