For Section 8, self-employment income is your gross receipts minus allowable business expenses — essentially your net profit. PHAs typically look at your most recent tax return (Schedule C or Schedule SE) and may average income over the past 1-2 years. You cannot deduct depreciation or business use of home from your Section 8 income calculation, even if the IRS allows it on your taxes.
How PHAs Calculate Self-Employment Income
When you work for an employer, income verification is straightforward — pay stubs and employer verification. Self-employment is more complex because income can vary month to month and business expenses reduce your net income.
PHAs use your net income from self-employment: total business revenue minus legitimate business expenses. But the PHA's definition of allowable expenses isn't identical to the IRS definition. The key difference: PHAs typically do not allow deductions for depreciation, principal payments on business loans, or business use of home.
What Documents You'll Need
Most recent federal tax return including Schedule C (Profit or Loss from Business) and Schedule SE (Self-Employment Tax).
Current year profit and loss statement if you don't have a recent tax return or if income has changed significantly.
Business records — bank statements, invoices, receipts for expenses, and any 1099 forms received.
Self-certification form — many PHAs have their own form for self-employed participants to detail monthly income and expenses.
Allowable Business Expenses
PHAs generally allow deductions for ordinary and necessary business expenses:
Materials and supplies used in your work. Vehicle expenses for business use (mileage or actual costs). Business insurance premiums. Advertising and marketing costs. Subcontractor or employee wages you pay. Professional licenses and certifications. Tools and equipment purchases (but not depreciation). Office supplies and postage. Business phone and internet (business portion only).
Expenses PHAs Typically Don't Allow
Depreciation. The IRS lets you deduct the declining value of business assets over time. PHAs don't — they see depreciation as a paper loss, not an actual cash expense.
Business use of home. Even if you legitimately work from home and deduct it on taxes, many PHAs don't allow this deduction for rent calculation purposes.
Principal payments on business loans. Interest is usually deductible, but the principal portion of loan payments is not.
These differences mean your income for Section 8 purposes may be higher than your taxable income on your IRS return.
Variable Income: How PHAs Handle Fluctuations
If your self-employment income varies significantly, PHAs may:
Average over 12 months using your most recent tax return.
Average over 2-3 years if your income has been trending up or down.
Use current income if your business situation has changed dramatically (new business, lost major client, seasonal work).
If your PHA is using old data and your income has dropped, request an interim recertification. You can report decreases anytime.
Starting a Business While on Section 8
You're allowed to start a business while on Section 8. Report the new income to your PHA. During the startup phase when expenses may exceed revenue, PHAs generally won't count negative net income (losses) as reducing your other income — they'll just count the self-employment income as zero.
Ask your PHA about the Family Self-Sufficiency (FSS) program. If you're growing a business and your income increases, FSS can set aside the difference in an escrow account that you receive when you complete the program.