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
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.