Self-employment income
(e) Self-employment income. (1) Self-employment income is the remuneration that is received as an independent contractor, either as (i) A sole proprietor of a business or farm; (ii) A professional in one's own practice; or (iii) A member of a partnership or corporation, as these terms are defined by the Internal Revenue Code, and regardless of whether the business entity is operated for profit. (2) The term net earnings from self-employment in a business enterprise means the gross revenue to the business endeavor from all sources before any other deductions or withholdings, minus (i) Allowable business expenses, as provided in paragraph (e)(3) of this section; (ii) Any job-connected disability expenses, as provided in paragraph (g) of this section; and (iii) Any return from investment allowance, as provided in paragraph (h) of this section. (3) Certain expenses of a self-employed business entity may be offset from the gross revenue from all sources of that self-employed business in determining the amount of net earnings for a particular calendar year. Expenses which may be deducted are only those items and costs which are permitted by the Internal Revenue Code for income tax purposes as ordinary and necessary to the operation of the business. However, expenses incurred on behalf of the disability annuitant may not be deducted, regardless of whether they are permitted by the Internal Revenue Code. These expenses that are incurred but cannot be deducted include the costs for wages paid to the individual, interest earnings, guaranteed payments, dividends, employee benefits, pension plans, and salary reduction or deferral plans. Also, self-employed disability annuitants may not deduct the costs of other withdrawals or expenses which are not used solely for business purposes. Examples of items that cannot be deducted if used at all for personal use by the self-employed disability annuitant include personal property items, such as automobiles and boats; real property, such as vacation property or residences; and memberships, dues, or fees for professional associations or public or private organizations or clubs. (4) Fees paid to an annuitant as a director of a corporation are a part of net earnings from self-employment.