Eligibility for unemployment benefits while working in self-employment
Eligibility is determined on a weekly basis. You may be eligible for benefits some weeks while working in self-employment and not others.
To be eligible for benefits for any week, you must meet three requirements:
- Work less than 32 hours (in any combination of employment, self-employment, or volunteer work) and earn less than your weekly benefit amount.
- Look for a job as an employee by making diligent efforts to find job openings and contact potential employers. Seeking clients for your business does not count.
- Be willing to rearrange or quit self-employment activity if it interferes with accepting employment under the conditions normal for your usual occupation: work schedule, wages, commute, etc.
Even if you meet the above requirements for a week, the system will deduct 50 percent of your earnings from your benefit payment.
Report earnings when requesting benefit payments
Each time you request a benefit payment, you are asked if you worked during the week you are requesting. You must answer "Yes" if you worked at all in self-employment. You must then report your hours worked and net earnings generated by that work, regardless of when you will receive payment. Sometimes this requires estimating your net earnings. The following section describes what business expenses you may deduct to determine your net income.
If you find that your net self-employment earnings were higher or lower than you estimated for a week, or if you just made a mistake, call Customer Service and they will make the correction and adjust your benefits.
Part-time real estate agents and farmers: report earnings in the week that a sale of property, crop, or livestock is closed.
Expenses allowed when calculating your net earnings
When reporting self-employment earnings for a week, you can only deduct expenses that are unique to self-employment. You cannot deduct expenses that the average homeowner or average employee doing similar work would also incur.
IRS rules do not apply; some expenses that are tax deductible are not allowed as deductions for unemployment benefit purposes.
Examples of what you can deduct: (Keep dated receipts.)
- Materials and goods purchased for the self-employment
- Rented or purchased equipment needed for the self-employment
- Services purchased: advertising, web page creation, a dedicated business phone line
- Business postage
- Certain mileage, at the IRS rate*
Examples of what you cannot deduct:
- An office or workspace in your home or garage
- A portion of your home mortgage
- A computer and printer that get personal use
- Personal vehicle expense
- Personal utility, phone, and internet bills
- Educational and professional fees that you might also incur if you were an employee
- Anything that gets regular personal use
*For each day you drive for self-employment purposes, you can deduct only the amount of mileage that exceeds the U.S. average daily commute of 32 miles round trip. Use the IRS standard mileage rate for self-employment (search mileage at www.irs.gov).
Calculating your business expense deductions
For any week you work less than 32 hours, and your net earnings do not exceed your weekly benefit amount, you will be eligible for at least a partial unemployment benefit payment. Therefore you must calculate your net income for such weeks as accurately as possible. Follow the guidelines below.
Guidelines for Calculating your Direct Business Deductions:
Materials, goods, postage, fuel for machines, other non-reusable items required to perform the work that week
Deduct only the amount of these items that were used to generate income in the week.
Purchases of Equipment, Tools, Reusable Items
Equipment purchased outright (no loan) can only be used as an expense in the week of purchase. No depreciation expense is allowed.
Purchases by Loan
You cannot deduct a monthly loan bill when you pay it. You must calculate the weekly amount by dividing the monthly bill by 4.33, and use the result as a deduction each week.
Services and Rented Equipment or Tools
Monthly service or rental: Divide the monthly service or rental fee by 4.33 to determine the weekly expense that you can deduct.
Weekly, daily, or hourly services or rental: Report the actual service or rental fee in the week you use the service or equipment.
"Per Job" services or rental: If you pay a flat fee (one fixed amount) for services or rented equipment for a multi-week project, divide the flat fee by the estimated number of weeks required to complete the project. The result is the weekly expense you deduct in each week of the project.