Save time with our cheat sheets, fact sheets, checklists & books!

February 16, 2009

Net business income (NBI)

Your Guide

Share on print
Print
Share on facebook
Share on twitter
Share on pinterest
Share on linkedin

Definition

The amount of income from self-employment  income after ordinary and necessary business expenses.
The net business income is the amount  on which the self-employed individual must pay self-employment taxes.

The net business income is determined from the individual’s Schedule C or Schedule F

Referring Cite

IRC § 1402(a), IRS Publication 560

Additional Helpful Information

  • Contributions cannot be based on a net-loss
  • For SEP and qualified plans, net earnings from self-employment is gross income from trade or business (providing the self-employed individual’s  personal services are a material income-producing factor) minus allowable business deductions. Allowable deductions include contributions to SEP and qualified plans for common-law employees and the deduction allowed for one-half of the individual’s  self-employment tax.
  • For SIMPLE plans, net earnings from self-employment is the amount on line 4 of Short Schedule SE (Form 1040), Self-Employment Tax, before subtracting any contributions made to the SIMPLE plan for the self-employed individual.

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

Share on facebook
Share on twitter
Share on pinterest
Share on linkedin
Share on print
More

Keep Learning

Saver’s Credit

Definition Also known as the Saver’s Tax Credit: Nonrefundable tax credit available to eligible individuals who make contributions to their retirement account. The saver’s credit

SIMPLE 401(k) Plan

Definition A SIMPLE 401(k) plan is a 401(k) plan  established by a small business for it’s employees. Earnings accrue on a tax-deferred basis and distributions

Be among the first to know when

IRA Rules
Change