Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 1 - GENERAL PROVISIONS › Section 18-235-1.14 - "Substantial gainful business or occupation", defined

Current through June, 2024
(a) As used in this chapter, "substantial
				gainful business or occupation" means a business or occupation that is both
				substantial and gainful. It is substantial if it involves significant physical
				or mental activity even if the individual works on a part-time basis, does less
				work, is paid less, or has fewer responsibilities than when the individual
				worked prior to the disability. The business or occupation is gainful if it is
				done for monetary consideration or profit.
(b) It shall be presumed that an individual
				whose earned income is greater than $30,000 for the taxable year is engaged in
				a substantial gainful business or occupation.
Example 1:
Taxpayer retires from employment on
				  disability that is total and permanent. After retirement, Taxpayer accepts
				  another job and Taxpayer's earned income is greater than $30,000 for the
				  taxable year. Taxpayer is engaged in a substantial gainful business or
				  occupation because Taxpayer's earned income is greater than $30,000 for the
				  taxable year.
Example 2:
Taxpayer retires as a teacher on
				  disability that is total and permanent. Taxpayer begins babysitting children
				  and selling items. Taxpayer's earned income from these two businesses is
				  greater than $30,000 for the taxable year. Taxpayer is engaged in a substantial
				  gainful business or occupation because Taxpayer's earned income is greater than
				  $30,000 for the taxable year.
(c) In the case of husband and wife filing a
				return jointly and only one of the spouses is disabled, only the disabled
				spouse's earned income is measured.
Example 1:
A and B file a joint income tax
				  return. Only A is disabled. A's earned income is less than $25,000 for the
				  taxable year. B's earned income is greater than $30,000 for the taxable year.
				  For purposes of determining whether an individual is engaged in a "substantial
				  gainful business or occupation," only the disabled spouse's earned income is
				  measured when a joint tax return is filed. A is not engaged in a substantial
				  gainful business or occupation because A's earned income is less than $30,000
				  for the taxable year.
(d)
				For purposes of this section, earned income includes wages, salaries, tips,
				business interest income, other employment compensation, and gross earnings
				from self-employment for the taxable year unless gross earnings for the taxable
				year are less than $60,000, in which case all net earnings from self-employment
				are included in earned income in lieu of gross earnings from self-employment.
				For purposes of this subsection, all entities shall be disregarded. Earned
				income does not include interest, dividends, capital gains, pensions, or
				deferred compensation.
Example 1:
Taxpayer retires on disability that
				  is total and permanent and receives an insurance settlement. Taxpayer does not
				  engage in any other employment. The insurance settlement is invested and
				  Taxpayer receives $35,000 in interest, dividends, and capital gains during the
				  taxable year. Taxpayer is not engaged in a substantial gainful business or
				  occupation because earned income does not include interest, dividends, and
				  capital gains.
Example 2.
Taxpayer works for wages and receives
				  $20,000 in wages for the taxable year. Taxpayer also has net earnings from
				  self-employment of $8,000 and gross earnings from self-employment of $75,000
				  for the taxable year. Taxpayer has earned income of $95,000 for the taxable
				  year and is engaged in a substantial gainful business or occupation because
				  earned income includes the $20,000 in wages and $75,000 of gross earnings from
				  self-employment.
Example 3.
Taxpayer has gross earnings from
				  selfemployment of $60,000 for the taxable year. Taxpayer is engaged in a
				  substantial gainful business or occupation because earned income includes the
				  $60,000 of gross earnings from self-employment.
Example 4.
Taxpayer has gross earnings from
				  self-employment of $59,999 and net earnings from self-employment of $30,000 for
				  the taxable year. Taxpayer has earned income of $30,000 for the taxable year
				  and is not engaged in a substantial gainful business or occupation. Taxpayer's
				  earned income includes net earnings from self-employment because gross earnings
				  from self-employment are less than $60,000 for the taxable year.
Example 5.
Taxpayer works for wages and receives
				  $10,000 in wages for the taxable year. Taxpayer also has gross earnings from
				  self-employment of $59,999 and net earnings from self-employment of $25,000 for
				  the taxable year. Taxpayer has earned income of $35,000 for the taxable year
				  and is engaged in a substantial gainful business or occupation because earned
				  income includes the $10,000 of wages and the $25,000 of net earnings from
				  self-employment.
Example 6.
Taxpayer has structured her business
				  as a C corporation for which she is sole shareholder. The corporation has gross
				  earnings of $75,000 for the taxable year. Taxpayer earns no wages, but the
				  corporation pays taxpayer a dividend of $25,000 for the taxable year. Taxpayer
				  has earned income of $75,000 for the taxable year and is engaged in a
				  substantial gainful business or occupation because earned income includes the
				  $75,000 of gross income earned by her corporation. Entities such as
				  corporations are disregarded for purposes of determining Taxpayer's earned
				  income.
(e) The presumption
				with respect to the $30,000 earned income limitation set forth in subsection
				(b) is applicable to all totally and permanently disabled persons, including
				the following:
(1) A person who lost or is
				born without both feet at or before the ankle;
(2) A person who lost or is born without both
				hands at or above the wrist;
(3) A
				person who lost or is born without one hand and one foot;
(4) A person who has an injury or defect
				resulting in permanent and complete paralysis of both legs or both arms or one
				leg and one arm; or
(5) A person
				who has an injury or defect resulting in incurable imbecility or mental
				illness.
Example 1:
Taxpayer retires on disability that
				  is total and permanent because Taxpayer loses both feet at the ankles in an
				  accident. After retirement, Taxpayer accepts another job and Taxpayer's earned
				  income from that job is greater than $30,000 for the taxable year. Taxpayer is
				  engaged in a substantial gainful business or occupation because Taxpayer's
				  earned income is greater than $30,000 for the taxable year.