An owner/operator of a rooming house, R, provided rooms and laundry services for 15 customers. She herself occupied one of the 16 rooms in the house. She applied for old age social security insurance benefits in April 1960, and was found entitled to benefits beginning in April 1959.

R reported net earnings from self-employment in the amount of $1,567 for 1959. She included in her earnings the net value of the room she herself occupied.

It was important to get this calculation right because it would affect the amount of her benefits, as well as any potential work deductions from her benefits.

R had showed her gross income as $5,301 for 1959, which included $738 as the rental value of the room she occupied. She showed business expenses of $3,734, which included $257 for the unit she occupied, attributable to light, heat, depreciation, etc.

Social Security held that the amounts related to her unit should not have been included in the calculation of her net earnings from self-employment.

For the year 1959, R’s Social Security benefits were subject to work reductions for one or more months if her net earnings from self-employment were greater than $1,200.

Because the amounts for her room were excluded, her net earnings from self-employment were $1,096. Thus, no work deductions were imposed.

See Social Security Ruling (SSR) 61-42.

This material should not be construed as legal advice for any particular fact situation, but is intended for general informational purposes only. For advice specific to any individual situation, an experienced attorney should be contacted.