HAR §17-663-70. Special income considerations

(a) Income derived from rental property shall be considered earned income for the twenty per cent earned income deduction only if a member of the household is actively engaged in managing the property for at least an average of twenty hours per week. The cost of doing business shall be deducted from income from rental property. If the twenty hours per week criterion is not met, the net income shall be considered unearned. (b) The proceeds from the sale of capital goods or equipment shall be calculated in the same manner as a capital gain for federal income tax purposes. Even if only fifty per cent of the proceeds from the sale of capital goods or equipment are taxed for federal income tax purposes, the department shall count the full amount of the capital gain as income. [Eff 3/19/93; am and comp 11/19/05; am and comp 10/07/10] (Auth: HRS §346-14) (Imp: 7 C.F.R. §§273.9(b)(1), 273.11(a)(3)) §17-663-71 663-39 §17-663-71 Costs of producing self-employment income - allowable exclusions. (a) Costs of producing self-employment income shall be calculated by anticipating the monthly allowable costs of producing the self-employment income. The expenses shall include, but shall not be limited to, the identifiable costs of: (1) Labor (wages paid to an employee or work contracted out); (2) Stock (inventory); (3) Raw materials (used to make a product); (4) Seed and fertilizer (for farming); (5) Interest paid to purchase income producing property such as equipment or capital assets; (6) Insurance premiums; (7) Taxes, assessments, and utilities paid on income producing property; (8) Service and repair of income producing property (including automobiles); (9) Rental of business equipment and property; (10) Advertisement; (11) Licenses and permits; (12) Legal or professional fees; (13) Business supplies; and (14) Payments on the principal of the purchase price of income producing real estate and capital assets, equipment, machinery, and other durable goods. (b) The following costs of producing self- employment income shall not be allowed: (1) Net loss sustained in any prior period; (2) Federal, state, and local income taxes, money set aside for retirement purposes, and other work related personal expenses such as transportation costs to and from work included in the twenty per cent earned income deduction; (3) Salaries paid to any household member, including the self-employed individual; and (4) Depreciation. (c) Some items such as automobiles and real property, may be for both business and personal use of the household. In these instances, the department shall prorate the portion of the expense attributable §17-663-71 663-40 to business use. [Eff 3/19/93; am and comp 11/19/05; am and comp 10/07/10] (Auth: HRS §346-14) (Imp: 7 C.F.R. §§273.9(c)(9); 273.11(a)and(b)) §17-663-72 Annualizing self-employment income. (a) Households subject to simplified reporting who derive their self-employment income monthly from a farming operation and who incur irregular expenses to produce such income shall be given the option to annualize the self-employment farm income and expenses over a twelve-month period. (b) Self-employment income which represents the household's annual income and which is received less often than monthly will be annualized over a twelve - month period even if the income is received within only a short period of time during that twelve months. (1) Self-employment income will be annualized even if the household receives income from other sources in addition to self-employment. (2) If there has been a substantial increase or decrease in business so that the averaged amount does not accurately reflect the house- hold's actual monthly circumstances, the self-employment income will be anticipated. (c) Self-employment income that is intended to meet the household's needs for only part of the year will be averaged over the length of time the income is intended to cover, rather than a twelve-month period. (d) If a self-employment enterprise has been in existence for less than one year: (1) The income from the self-employment will be averaged over the period of time the business has been in existence, and the monthly amount projected for the coming year; or (2) If the business has been in operation for such a short time that there is insufficient information to make a reasonable projection, the household may be certified for less than one year until the business has been operating long enough to base a longer projection. [Eff 3/19/93; am 8/19/96; comp 11/19/05; am and comp 10/07/10] (Auth: §17-663-73 663-41 HRS §346-14) (Imp: C.F.R. §273.11(a)(1), (2)) §17-663-73 Determining monthly self-employment income. The procedures for arriving at the monthly self-employment income are as follows: (a) For the period of time the income is determined to cover: (1) Add all gross self-employment income including capital gains; (2) Exclude the cost of producing the self- employment income; and (3) Divide the self-employment income by the number of months over which the income will be averaged. (b) For households whose self-employment income is not averaged but is calculated on an anticipated basis, the department shall: (1) Add any capital gains the household antici- pates receiving in the next twelve months starting with the date the application is filed and dividing this amount by twelve; (2) Use the average monthly capital gains figure in successive certification periods during the next twelve months, except that a new average monthly amount shall be calculated over the twelve-month period if the antici- pated amount of capital gains changes; and (3) Then: (A) Add the anticipated monthly amount of capital gains to the anticipated monthly self-employment income; (B) Calculate the cost of producing the self-employment income by anticipating monthly allowable costs of producing; and (C) Subtract the cost of producing the self- employment income from the self- employment income. (c) The monthly net self-employment earned income, less any farm self-employment losses, will be added to any other earned income received by the household. The total monthly earned income, less the §17-663-73 663-42 earned income deduction, will then be added to all monthly unearned income received by the household. (d) Farm self-employment losses will be offset against other countable household income. To be considered a self-employed farmer, the farmer must receive or anticipate receiving annual gross income of $1,000 or more from the farming enterprise. Farming losses will be calculated as follows: (1) Farming losses occur when the cost of producing the income exceeds the gross income. These losses will be averaged or anticipated over the year in the same manner as farm self-employment income to determine monthly losses. (2) The monthly losses will be subtracted from other countable household income for both the gross income determination and the budget computation. (3) When there is other self-employment income in the household, the farming losses will be subtracted from the net self-employment income, not from the total household income. If there are losses remaining after this computation, the remainder will be subtracted from the total of other household income. [Eff 3/19/93; comp 11/19/05; am and comp 10/07/10] (Auth: HRS §346-14) (Imp: 7 C.F.R. §273.11(a)(1), (2), (3))