Households whose income is derived either wholly or in part from a self-employment enterprise are treated in accordance with the procedures listed in paragraphs (1) through (10).  • 1

• (1) Capital gains.  The proceeds from the sale of capital goods or equipment is income for program purposes and is calculated in the same manner as a capital gain for federal income tax purposes.  Even though a percentage of the proceeds from the sale of capital goods or equipment is taxed for federal income tax purposes, the worker counts the full amount of capital gain as income.
• (2) Profit sharing.  Households who operate S corporations, general or limited partnerships, or limited liability companies may receive profit sharing that is reported on the household's personal income tax return.  When a household member:
  • (A) actively participates in the operations, the income from profit sharing is considered part of the household's self-employed earned income; or
  • (B) does not actively participate in the operations, the income from profit sharing is considered part of the household's unearned income.
• (3) Self-employed farm income.  To be considered a self-employed farmer, the farmer must receive or anticipate receiving annual gross proceeds of $1,000 or more from the farming enterprise.
  • (A) Farming is defined as cultivating or operating a farm for profit either as owner or tenant.
  • (B) A farm includes stock, dairy, poultry, fish, fruit, and truck farms, and plantations, ranches, ranges, and orchards.
    • (i) A fish farm is an area where fish are grown or raised and where they are artificially fed, protected, and cared for, and does not include an area where they are only caught or harvested.
    • (ii) A plant nursery is a farm for purposes of this definition.
  • (C) A loss of income for a self-employed farmer cannot be used to offset income from other household income.  When a self-employed farmer reports a loss instead of a profit on the business, the worker does not deduct the loss from other household income.
• (4) Monthly self-employment income.  Self-employment income received on a monthly basis but which represents a household's annual support is normally averaged over a 12-month period.  If the averaged amount does not accurately reflect the household's actual monthly circumstances because the household has experienced a substantial increase or decrease in business, the worker calculates the self-employment income based on anticipated earnings.
• (5) Seasonal self-employment income.  Self-employment income intended to meet the household's needs for only part of the year is averaged over the period of time it is intended to cover.  For example, the income of self-employed vendors who work only in the summer and supplement their income from other sources during the balance of the year is averaged over the summer months rather than a 12‑month period.
• (6) Annualized self-employment income.  Self-employment income which represents a household's annual support must be annualized over a 12-month period, even if the income is received in a shorter period of time.  For example, self‑employment income received by crop farmers must be averaged over a 12‑month period if the income represents the farmer's annual support.
  • (A) If the averaged annualized amount does not accurately reflect the household's actual circumstances because the household has experienced substantial increase or decrease in business, the worker calculates the self-employment income on anticipated earnings.
  • (B) The worker does not calculate self-employment income on the basis of prior earnings such as income tax returns when an increase or decrease of business has occurred.
    • (i) If the household's self-employment enterprise has been in existence for less than a year, the income from that self-employment enterprise must be averaged over the period of time the business has been in operation and the monthly amount projected for the coming year.
    • (ii) If the business has been in operation for a short time and there is insufficient data to make a reasonable projection, self-employment income is recomputed at each new certification until a full year's information is available.  • 2
• (7) Anticipated income.  When a household who would normally have the self-employment income annualized experiences a substantial increase or decrease in business, the worker calculates the self-employment income based on anticipated earnings.
  • (A) For those households whose self-employment income is calculated on an anticipated basis, the worker adds any capital gains the household anticipates it will receive in the next 12 months, starting with the date the application is filed, and divides this amount by 12.  This amount is used in successive certification periods during the next 12 months except that a new average monthly amount must be calculated over this 12-month period if the anticipated amount of capital gain changes.
  • (B) The worker adds the anticipated monthly amount of capital gains to the anticipated monthly self-employment income, and subtracts the cost of producing the self-employment income.
  • (8) Determining net monthly self-employment income.  When the household has business expenses associated with its self-employment income, the business expenses must be deducted before determining whether the household meets the maximum gross income standards shown on Oklahoma Department of Human Services (OKDHS) Appendix C-3, Maximum Food Benefit Allotments and Standards for Income and Deductions.  When the household does not have business expenses, the gross self-employment income is used.
  • (A) When the household has filed an income tax return on its self-employment income for the most recent year, the worker uses the net self-employment income shown on the income tax return and divides the net self-employment income by the number of months to be averaged.  • 3
  • (B) When the household did not file an income tax return on its self-employment income for the most recent year, the worker uses (i) through (iii) to determine the net monthly self-employment income.
    • (i) The worker computes gross self-employment income, including capital gains, using the client's self-employment business records.
    • (ii) If the client declares incurred business expenses, the worker subtracts 50% of the gross self-employment income as business expenses.  If the household did not incur business expenses, a business expense deduction is not given.
    • (iii) The worker then divides the net self-employment income by the number of months to be averaged.
  • (C) The worker adds monthly net self-employment income to all other earned income received by the household.  When the household reports a loss instead of a profit on the business, the worker does not deduct the loss from other household income.
    • (i) The worker adds the total monthly earned income less the earned income deduction according to OKDHS Appendix C-3 to all other monthly income received by the household.
    • (ii) The worker subtracts the standard deduction, dependent care, and shelter costs as for any other household per OAC 340:50-7-31 to determine the monthly net income of the household.
• (9) Household with income from boarders.  A household that operates a commercial boarding house may be considered a food benefit household and self-employed as shown in paragraph (8) of this subsection.  A household with boarders or roomers that is not a commercial boarding house may receive food benefits as shown in subparagraphs (A) through (C) of this paragraph.
  • (A) The worker excludes a person paying a reasonable amount for room and board from the household and counts payments from the boarder as self-employment income when determining the household's eligibility and benefit level. 
    • (i) The income from a boarder includes all direct payments to the household for room and meals, including contributions to the household for part of the household shelter expense.
    • (ii) The worker does not count expenses paid directly by a boarder to someone outside the household as income to the household.
  • (B) The worker excludes 50% of the boarder payment as the cost of doing business.
  • (C) The worker includes the net income from self-employment with other earned income minus the earned income deduction.
    • (i) The worker computes the shelter cost incurred by the household, even if the boarder contributes part of the  shelter expense, to determine if the household qualifies for a shelter deduction.
    • (ii) The shelter and utility cost must not include any expense billed to and directly paid by the boarder to a third party.
• (10) Income from rental property.  The worker considers income received from rental property as self-employment income.
  • (A) The worker treats rental income as earned income if a member of the household actively manages the property an average of at least 20 hours per week.
  • (B) When a household member does not actively manage the property at least 20 hours each week, the worker considers the income as unearned.  The person is eligible for business expenses described at (8) of this Section.