WI Homestead Credit earned income

[WilliamAndAnn]

I am trying to do the WI Homestead Credit, but the EasyStep never asks if I have earned income. If I go to forms and look at schedule H, it has automatically checked "No" for Question 1d. But my State tax form 1 shows that I have income, which are from 1099-NEC, hobby income, and unemployment. Do any of those count as earned income to qualify for the Homestead Credit? If they do, how do I override TurboTax to answer "yes" to question 1d?

[LenaH]

For purposes of the Schedule H, only wages, salaries, tips, other employee compensation, and net earnings from self-employment count as Earned Income. Hobby income and unemployment does not count towards Earned Income. 

Do you have a Schedule C or does your 1099-NEC flow to Other Income? Please note that your 1099-NEC must flow to a Schedule C (self-employment income) and you must have net earnings from self-employment. 

Example:  You have $5,000 of wages and ($8,000) of net earnings from self-employment. Your total earned income would be less than zero. Therefore, unless you were over the age of 61, as of December 31, 2021, or disabled, you would not qualify to claim the homestead credit. 

[WilliamAndAnn]

Thanks LenaH. I am asking this for a friend of my daughter. The income was an hourly job, and the employer gave a 1099-NEC instead of a W-2. She put it on the tax form as Other Income. It sounds like that makes it ineligible for Homestead credit income, since she's not using a schedule C. She doesn't have a business, it was a job she got hired for, and he ended up giving her a 1099-NEC. When would a schedule C be required?

In your example, just as in the WI instructions example, the net earnings from self-employment are in parentheses, indicating a negative net, right? (income minus expenses)  But if your net was positive, you would add it to wages to get the total. I am only asking because the examples all have net earnings as negative, and I wondered if that is because they can't be counted even if they are positive, or if those examples just happen to have a negative net.

[Vanessa A]

She doesn't have a business, it was a job she got hired for, and he ended up giving her a 1099-NEC. When would a schedule C be required? 

This needs to be reported on Schedule C as it was income received as an independent contractor.  Since it was reported on the 1099-NEC, the person she did the work for did not consider her an employee so he did not take taxes out of her pay which means she will need to pay Self Employment taxes.  This will also solve the problem with TurboTax saying she does not have earned income. 

A schedule C is required whenever you work as an independent contract or own or operate a business as a sole proprietor. 

In your example, just as in the WI instructions example, the net earnings from self-employment are in parentheses, indicating a negative net, right? (income minus expenses) I am only asking because the examples all have net earnings as negative, and I wondered if that is because they can't be counted even if they are positive, or if those examples just happen to have a negative net.

No.  If the income IS POSITIVE it IS COUNTED.  The examples are to show that if your expenses outweigh your income, then you would not be eligible as you are showing a loss or negative and you are not showing any taxable earned income.