To allow Connecticut to permit certain recipients of aid to families with dependent children a one-time election to purchase capital equipment for a small business, to prohibit depreciation of such equipment, and to require that repayments by such persons of the principal portion of small business loans be treated as business expenses for purposes of the program of aid to families with dependent children.

Amends the Social Security Act to authorize Connecticut, for purposes of the aid to families with dependent children program (AFDC), to permit a self-employment program participant: (1) a one-time election to expense rather than depreciate purchased capital equipment; and (2) to expense principal repayments on a business loan.

Amends the Internal Revenue Code to prohibit a depreciation deduction for certain property of AFDC recipients.