U.S. Individual Income Tax Return Forms

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2025

Instructions for Schedule SE
(Form 1040)
Section references are to the Internal Revenue Code unless otherwise
noted.

You must also pay SE tax on your share of certain partnership income
and your guaranteed payments. See Partnership Income or Loss, later.

Future Developments

Employees of Churches and Church
Organizations

For the latest information about developments related to Schedule SE
(Form 1040) and its instructions, such as legislation enacted after they
were published, go to IRS.gov/ScheduleSE.

What’s New
Maximum income subject to social security tax. For 2025, the
maximum amount of self-employment income subject to social security
tax is $176,100.

Form 1040-SS. Using Schedule SE (Form 1040) to report self-employment tax for residents of U.S. territories. Schedule SE (Form
1040) must be filed with Form 1040-SS to report self-employment taxes
by residents of the U.S. Virgin Islands, Guam, American Samoa, the
Commonwealth of the Northern Mariana Islands (CNMI), and Puerto
Rico. For additional information, see the Instructions for Form 1040-SS.

Ministers, Members of Religious Orders, and
Christian Science Practitioners
In most cases, you must pay SE tax on salaries and other income for
services you performed as a minister, member of a religious order who
hasn’t taken a vow of poverty, or Christian Science practitioner. But if you
filed Form 4361 and received IRS approval, you will be exempt from
paying SE tax on those net earnings. If you had no other income subject
to SE tax, check box number 1 for Form 4361 on Schedule 2 (Form
1040), line 4. See the instructions for Schedule 2 (Form 1040), line 4, for
more information. However, if you had other earnings of $400 or more
subject to SE tax, see line A at the top of Schedule SE.

General Instructions
Use Schedule SE (Form 1040) to figure the tax due on net earnings from
self-employment. The Social Security Administration (SSA) uses the
information from Schedule SE to figure your benefits under the social
security program. This tax applies no matter how old you are and even if
you are already getting social security or Medicare benefits.
Additional information. See Pub. 225 or Pub. 334.

Who Must File Schedule SE

You must file Schedule SE if:
• The amount on line 4c of Schedule SE is $400 or more, or
• You had church employee income of $108.28 or more. (Income from
services you performed as a minister, member of a religious order, or
Christian Science practitioner isn’t church employee income.) See
Employees of Churches and Church Organizations, later.
Exception to filing Schedule SE. If you filed Form 4029 or Form 4361
and received IRS approval, you may not need to file Schedule SE. See
Ministers, Members of Religious Orders, and Christian Science
Practitioners and Members of Certain Religious Sects, later, for
information on how to report your self-employment earnings.
Even if you had a loss or a small amount of income from

TIP self-employment, it may be to your benefit to file Schedule SE

and use either "optional method" in the instructions for Part II of
Schedule SE (discussed later).

!

CAUTION

If you have ever filed Form 2031 to elect social security
coverage on your earnings as a minister, you can’t revoke that
election.

If you must pay SE tax, include this income on Schedule SE, line 2.
But don’t report it on Schedule SE, line 5a; it isn’t considered church
employee income. Also, include on line 2:
• The rental value of a home or an allowance for a home furnished to
you (including payments for utilities); and
• The value of meals and lodging provided to you, your spouse, and
your dependents for your employer’s convenience.
However, don’t include on line 2:

• Retirement benefits you received from a church plan after retirement,

or

• The rental value of a home or an allowance for a home furnished to
you (including payments for utilities) after retirement.
If you were a duly ordained minister who was an employee of a
church and you must pay SE tax, the unreimbursed business expenses
that you incurred as a church employee are not deductible as an
itemized deduction for income tax purposes. However, when figuring SE
tax, subtract on line 2 the allowable expenses from your self-employment
earnings and attach an explanation.
If you were a U.S. citizen or resident alien serving outside the United
States as a minister or member of a religious order and you must pay SE
tax, you can’t reduce your net earnings by the foreign earned income
exclusion or the foreign housing exclusion or deduction.

Who Must Pay Self-Employment (SE)
Tax

See Pub. 517 for additional details regarding social security for
members of the clergy and religious workers.

Self-Employed Persons

If you have conscientious objections to social security insurance
because of your membership in and belief in the teachings of a religious
sect recognized as being in existence at all times since December 31,
1950, and which has provided a reasonable level of living for its
dependent members, you are exempt from SE tax if you received IRS
approval by filing Form 4029. In this case, don’t file Schedule SE.

You must pay SE tax if you had net earnings of $400 or more as a
self-employed person. If you are in business (farm or nonfarm) for
yourself, you are self-employed.

Sep 26, 2025

Members of Certain Religious Sects

Instructions for Schedule SE (Form 1040) (2025) Catalog Number 24334P
Department of the Treasury Internal Revenue Service www.irs.gov

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Reminders

If you had church employee income of $108.28 or more, you must pay
SE tax. Church employee income is wages you received as an employee
(other than as a minister, member of a religious order, or Christian
Science practitioner) of a church or qualified church-controlled
organization that has a certificate in effect electing an exemption from
employer social security and Medicare taxes.

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Instead, check box number 2 for Form 4029 on Schedule 2 (Form 1040),
line 4. See the instructions for Schedule 2 (Form 1040), line 4, and Pub.
517 for details.

U.S. Citizens Employed by Foreign Governments
or International Organizations
You must pay SE tax on income you earned as a U.S. citizen employed
by a foreign government (or, in certain cases, by a wholly owned
instrumentality of a foreign government or an international organization
under the International Organizations Immunities Act) for services
performed in the United States, Puerto Rico, Guam, American Samoa,
the Commonwealth of the Northern Mariana Islands, or the U.S. Virgin
Islands. Report income from this employment on Schedule SE, line 2. If
you performed services elsewhere as an employee of a foreign
government or an international organization, those earnings are exempt
from SE tax.
Exception—Dual citizens. A person with dual U.S.-foreign citizenship
is generally considered to be a U.S. citizen for social security purposes.
However, if you are a U.S. citizen and also a citizen of a country with
which the United States has a bilateral social security agreement, your
work for the government of that foreign country may be exempt from U.S.
social security taxes. For more information about these agreements, see
the exception shown in the next section.

If you are a self-employed U.S. citizen or resident alien living outside the
United States, in most cases you must pay SE tax. Foreign earnings from
self-employment can’t be reduced by your foreign earned income
exclusion when computing SE tax.
Exception. The United States has social security agreements with
many countries to eliminate dual taxes under two social security
systems. Under these agreements, you must generally pay social
security and Medicare taxes to only the country in which you live.
The United States now has social security agreements with the
following countries: Australia, Austria, Belgium, Brazil, Canada, Chile,
the Czech Republic, Denmark, Finland, France, Germany, Greece,
Hungary, Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands,
Norway, Poland, Portugal, the Slovak Republic, Slovenia, South Korea,
Spain, Sweden, Switzerland, the United Kingdom, and Uruguay.
If you have questions about international social security agreements,
or to see if any additional agreements have been entered into, you can
go to the SSA’s International Programs website at SSA.gov/International.
The website also provides contact information for questions about
benefits and the agreements.
If your self-employment income is exempt from SE tax, you should
get a statement from the appropriate agency of the foreign country
verifying that your self-employment income is subject to social security
coverage in that country. If the foreign country won’t issue the statement,
go to the SSA Office of Earnings and International Operations at SSA
International Programs Online Certificate of Coverage Service. Don’t
complete Schedule SE. Instead, attach a copy of the statement to Form
1040, 1040-SR, or 1040-NR, and on Schedule 2 (Form 1040), line 4,
check box number 3 and enter “Exempt, see attached statement.”

Nonresident Alien
If you are a self-employed nonresident alien living in the United States,
you must pay SE tax if an international social security agreement in effect
determines that you are covered under the U.S. social security system.
See Exception under U.S. Citizens or Resident Aliens Living Outside the
United States, earlier, for information about international social security
agreements. If your self-employment income is subject to SE tax,
complete Schedule SE and file it with your Form 1040-NR.

Chapter 11 Bankruptcy Cases
While you are a debtor in a chapter 11 bankruptcy case, your net profit or
loss from self-employment (for example, from Schedule C or Schedule F)
won’t be included in your Form 1040 or 1040-SR income. Instead, it will
be included on the income tax return (Form 1041) of the bankruptcy

2

Enter on the dotted line to the left of Schedule SE, line 3, “Chap. 11
bankruptcy income” and the amount of your net profit or (loss). Combine
that amount with the total of lines 1a, 1b, and 2 (if any) and enter the
result on line 3.
For other reporting requirements, see Chapter 11 Bankruptcy Cases
in the Instructions for Form 1040.

More Than One Business
If you had two or more businesses subject to SE tax, your net earnings
from self-employment are the combined net earnings from all of your
businesses. If you had a loss in one business, it reduces the income from
another. Figure the combined SE tax on one Schedule SE.

Joint Returns
Show the name of the spouse with self-employment income on
Schedule SE. If both spouses have self-employment income, each must
file a separate Schedule SE.
Include the total profits or losses from all businesses on Form 1040 or
1040-SR. Enter the combined SE tax on Schedule 2 (Form 1040), line 4.

Community Income
If any of the income from a business (including farming) is community
income, then the income and deductions are reported as follows.
• If only one spouse participates in the business, all of the income from
that business is the self-employment earnings of the spouse who carried
on the business.
• If both spouses participate, the income and deductions are allocated
to the spouses based on their distributive shares.
• If either or both spouses are partners in a partnership, see Partnership
Income or Loss, later.
• If both spouses elected to treat the business as a qualifying joint
venture, see Qualified Joint Ventures, later.
Married filing separately. If you and your spouse had community
income and file separate returns, attach Schedule SE to the return of
each spouse with self-employment earnings under the rules described
earlier. Also, attach Schedule(s) C or F (showing the spouse’s share of
community income and expenses) to the return of each spouse.
Spouse who carried on the business. If you are the only spouse
who carried on the business, you must include on Schedule SE, line 3,
the net profit or (loss) reported on the other spouse’s Schedule C or F
(except in those cases described later under Income and Losses Not
Included in Net Earnings From Self-Employment). Enter on the dotted
line to the left of Schedule SE, line 3, “Community income taxed to
spouse” and the amount of any net profit or (loss) allocated to your
spouse as community income. Combine that amount with the total of
lines 1a, 1b, and 2. Enter the result on line 3.
Spouse who didn’t carry on the business. If you aren’t the spouse
who carried on the business and you had no other income subject to SE
tax, check box number 3 and enter “ECI — Exempt community income”
on Schedule 2 (Form 1040), line 4. Don’t file Schedule SE. See the
instructions for Schedule 2 (Form 1040), line 4, for more information.
But if you have $400 or more of other earnings subject to SE tax, you
must file Schedule SE. Include on Schedule SE, line 1a or 2, the net
profit or (loss) from Schedule(s) C or F allocated to you as community
income. On the dotted line to the left of Schedule SE, line 3, enter
“Exempt community income” and the allocated amount. Figure the
amount to enter on line 3 as follows.
• If the allocated amount is a net profit, subtract it from the total of lines
1a, 1b, and 2.
• If the allocated amount is a loss, treat it as a positive amount and add
it to the total of lines 1a, 1b, and 2.

!

CAUTION

Community income included on Schedule(s) C or F must be
divided for income tax purposes based on the community
property laws of your state. See Pub. 555 for more information.

Qualified Joint Ventures (QJV)

If you and your spouse materially participate as the only members of a
jointly owned and operated business, and you file a joint return for the tax

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U.S. Citizens or Resident Aliens Living Outside
the United States

estate. However, you (not the bankruptcy estate) are responsible for
paying SE tax on your net earnings from self-employment.

TREASURY/IRS AND OMB USE ONLY DRAFT
year, you can make a joint election to be taxed as a QJV instead of a
partnership. For information on what it means to materially participate,
see Material participation in the Instructions for Schedule C (Form 1040).
To make this election, you must divide all items of income, gain, loss,
deduction, and credit attributable to the business between you and your
spouse in accordance with your respective interests in the venture. Each
of you must file a separate Schedule C or F. On each line of your
separate Schedule C or F, you must enter your share of the applicable
income, deduction, or loss. Each of you must also file a separate
Schedule SE to pay SE tax, as applicable.
For more information on qualified joint ventures, go to IRS.gov/QJV.
Rental real estate business. If you and your spouse make the election
to be taxed as a QJV for your rental real estate business, the income
generally isn’t subject to SE tax. To indicate that election, be sure to
check the “QJV” box in Part I, line 2, of each Schedule E that the rental
property is listed on. Don’t file Schedule SE unless you have other
income subject to SE tax. For an exception to this income not being
subject to SE tax, see item 3 under Other Income and Losses Included in
Net Earnings From Self-Employment, later.

Fiscal Year Filers

If your tax year is a fiscal year, use the tax rate and annual earnings limit
that apply at the time the fiscal year begins. Don’t prorate the tax or
annual earnings limit for a fiscal year that overlaps the date of a change
in the tax or annual earnings limit.

Line Instructions
You will need to figure your net earnings from self-employment. To find
out what is included as net earnings from self-employment, see Net
Earnings From Self-Employment, later.
Enter all negative amounts in (parentheses).

TIP

Instructions for Part I
You Have Only Church Employee Income
Subject to SE Tax
If your only income subject to SE tax is church employee income
(described earlier under Employees of Churches and Church
Organizations), skip lines 1 through 4b. Enter -0- on line 4c, and go to
line 5a.
Note. Income from services you perform as a minister, member of a
religious order, or Christian Science practitioner isn’t church employee
income.

Line 1b
If you were receiving social security retirement or social security disability
benefits at the time you received your Conservation Reserve Program
(CRP) payment(s), enter the amount of your taxable CRP payment(s) on
line 1b. These payments are included on Schedule F, line 4b, or listed in
box 20, code AQ, of Schedule K-1 (Form 1065).

Lines 4a Through 4c
If both lines 4a and 4c are less than $400 and you have an amount on
line 1b, combine lines 1a and 2.
• If the total of lines 1a and 2 is $434 or more, file Schedule SE
(completed through line 4c) with your tax return. Enter -0- on Schedule 2
(Form 1040), line 4.*
• If the total of lines 1a and 2 is less than $434, don’t file Schedule SE
unless you choose to use an optional method to figure your SE tax.

Line 13
If you are filing Form 1040-SS, skip this line.

Additional Medicare Tax

A 0.9% Additional Medicare Tax may apply to you if the total amount on
line 6 of all your Schedules SE exceeds one of the following threshold
amounts (based on your filing status).
• Married filing jointly— $250,000
• Married filing separately— $125,000
• Single, Head of household, or Qualifying surviving spouse—
$200,000

If you have both wages and self-employment income, the threshold
amount for applying the Additional Medicare Tax on the self-employment
income is reduced (but not below zero) by the amount of wages subject
to Additional Medicare Tax.
Use Form 8959, Additional Medicare Tax, to figure this tax. For more
information, see the Instructions for Form 8959, or go to IRS.gov/
ADMTfaqs.

Net Earnings From Self-Employment

In most cases, net earnings include your net profit from a farm or
nonfarm business.

Partnership Income or Loss
If you were a general or limited partner in a partnership, include on
line 1a or line 2, whichever applies, the amount of net earnings from
self-employment from box 14, code A, of Schedule K-1 (Form 1065).
General partners should reduce this amount by certain expenses before
entering it on Schedule SE. See your Schedule K-1 instructions. If you
reduce the amount you enter on Schedule SE, you must attach an
explanation. Limited partners should include only guaranteed payments
for services actually rendered to or on behalf of the partnership. Whether
a partner qualifies as a limited partner for purposes of self-employment
tax depends on whether the partner is considered a limited partner under
section 1402(a)(13).
If a partner died and the partnership continued, include in
self-employment income the deceased’s distributive share of the
partnership’s ordinary income or loss through the end of the month in
which the partner died. See section 1402(f).
If you were married and both you and your spouse were partners in a
partnership, each of you must report your net earnings from
self-employment from the partnership. Each of you must file a separate
Schedule SE and report the partnership income or loss on Schedule E
(Form 1040), Part II, for income tax purposes. If only one of you was a
partner in a partnership, the spouse who was the partner must report
their net earnings from self-employment from the partnership.
Community income. Your own distributive share of partnership income
is included in figuring your net earnings from self-employment. Unlike the
division of that income between spouses for figuring income tax, no part
of your share can be included in figuring your spouse’s net earnings from
self-employment.

Share Farming
You are considered self-employed if you produce crops or livestock on
someone else’s land for a share of the crops or livestock produced (or a
share of the proceeds from the sale of them). This applies even if you
paid another person (an agent) to do the actual work or management for
you. Report your net earnings for income tax purposes on Schedule F
(Form 1040) and for SE tax purposes on Schedule SE. See Pub. 225 for
details.

Other Income and Losses Included in Net
Earnings From Self-Employment
1. Rental income from a farm if, as landlord, you materially
participated in the production or management of the production of farm
3

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If you and your spouse make the election for a farm rental business
that you report on Form 4835, Farm Rental Income and Expenses, each
of you must file a separate Form 4835 to report your share of farm rental
income based on crops or livestock produced by the tenant. Don’t file
Schedule SE unless you have other income subject to the SE tax.

* If you also have church employee income (described earlier under
Employees of Churches and Church Organizations), also complete lines
5a and 5b. Complete the rest of Schedule SE, as appropriate.

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products on this land. This income is farm earnings. To determine
whether you materially participated in farm management or production,
don’t consider the activities of any agent who acted for you. The material
participation tests for landlords are explained in Pub. 225.
2. Cash or a payment-in-kind from the Department of Agriculture for
participating in a subsidy or conservation reserve program.
3. Payments for the use of rooms or other space when you also
provided substantial services for the convenience of your tenants.
Examples are hotel rooms, boarding houses, tourist camps or homes,
trailer parks, parking lots, warehouses, and storage garages. See Pub.
334 for more information.
4. Income from the retail sale of newspapers and magazines if you
were age 18 or older and kept the profits.
5. Income you receive as a direct seller. Newspaper carriers or
distributors of any age are direct sellers if certain conditions apply. See
Pub. 334 for details.
6. Amounts received by current or former self-employed insurance
agents and salespersons that are:
a. Paid after retirement but figured as a percentage of commissions
received from the paying company before retirement,
b.

Renewal commissions, or

However, certain termination payments received by former insurance
salespersons aren’t included in net earnings from self-employment (as
explained in item 10 under Income and Losses Not Included in Net
Earnings From Self-Employment, later).
7. Income of certain crew members of fishing vessels with crews of
normally fewer than 10 people. See Pub. 334 for details.
8. Fees as a state or local government employee if you were paid
only on a fee basis and the job wasn’t covered under a federal-state
social security coverage agreement.
9. Interest received in the course of any trade or business, such as
interest on notes or accounts receivable.
10. Fees and other payments received by you for services as a
director of a corporation.
11. Recapture amounts under sections 179 and 280F that you
included in gross income because the business use of the property
dropped to 50% or less. Don’t include amounts you recaptured on the
disposition of property. See Form 4797.
12. Generally, fees you received as a professional fiduciary. This may
also apply to fees paid to you as a nonprofessional fiduciary if the fees
relate to active participation in the operation of the estate’s business, or
the management of an estate that required extensive management
activities over a long period of time.
13. Gain or loss from section 1256 contracts or related property by
an options or commodities dealer in the normal course of dealing in or
trading section 1256 contracts.

Income and Losses Not Included in Net
Earnings From Self-Employment
1. Salaries, fees, and other income subject to social security or
Medicare tax that you received for performing services as an employee,
including services performed as an employee under the railroad
retirement system. This includes services performed as a public official
(except as a fee-basis government employee as explained in item 8
under Other Income and Losses Included in Net Earnings From
Self-Employment, earlier).
2. Fees received for services performed as a notary public. If you
had no other income subject to SE tax, check box number 3 and enter
“Exempt—Notary” on Schedule 2 (Form 1040), line 4. Don’t file
Schedule SE. However, if you had other earnings of $400 or more
subject to SE tax, enter “Exempt—Notary” and the amount of your net
profit as a notary public from Schedule C on the dotted line to the left of
Schedule SE, line 3. Subtract that amount from the total of lines 1a, 1b,
and 2, and enter the result on line 3.
3. Income you received as a retired partner under a written
partnership plan that provides for lifelong periodic retirement payments if
4

4. Income from real estate rentals if you didn’t receive the income in
the course of a trade or business as a real estate dealer. Report this
income on Schedule E.
5. Income from farm rentals (including rentals paid in crop shares)
if, as landlord, you didn’t materially participate in the production or
management of the production of farm products on the land. See Pub.
225 for details. Report this income on Form 4835. Use two Forms 4835 if
you and your spouse made an election to be taxed as a QJV.
6. Payments you receive from the CRP if you are receiving social
security benefits for retirement or disability. Deduct these payments on
line 1b of Schedule SE.
7. Dividends on shares of stock and interest on bonds, notes, or
other evidence of indebtedness issued with interest coupons or in
registered form by any corporation (including those issued by a
government or its political subdivision), if you didn’t receive the income in
the course of your trade or business as a dealer in stocks or securities.
8.

Gain or loss from:

a.

The sale or exchange of a capital asset;

b. The sale, exchange, involuntary conversion, or other disposition
of property unless the property is stock in trade or other property that
would be includible in inventory, or held primarily for sale to customers in
the ordinary course of the business; or
c.

Certain transactions in timber, coal, or domestic iron ore.

9.

Net operating losses from other years.

10. Termination payments you received as a former insurance
salesperson if all of the following conditions are met.
a. The payment was received from an insurance company because
of services you performed as an insurance salesperson for the company.
b. The payment was received after termination of your agreement to
perform services for the company.
c. You didn’t perform any services for the company after termination
and before the end of the year in which you received the payment.
d. You entered into a covenant not to compete against the company
for at least a 1-year period beginning on the date of termination.
e. The amount of the payment depended primarily on policies sold
by or credited to your account during the last year of the agreement, or
the extent to which those policies remain in force for some period after
termination, or both.
f. The amount of the payment didn’t depend to any extent on length
of service or overall earnings from services performed for the company
(regardless of whether eligibility for the payment depended on length of
service).

Statutory Employee Income
If you were a statutory employee, don’t include the net profit or (loss)
from Schedule C, line 31, on Schedule SE, line 2. But be sure to include
on line 8a statutory employee social security wages and tips from Form
W-2.

Instructions for Part II
Optional Methods
How the Optional Methods Can Help You
Social security coverage. The optional methods may give you credit
toward your social security coverage even though you have a loss or a
small amount of income from self-employment.
Credits affected by earned income. Using the optional methods may
qualify you to claim the earned income credit (EIC), additional child tax
credit (ACTC), or child and dependent care credit or give you a larger
credit if your net earnings from self-employment (determined without
using the optional methods) are less than $7,240. Figure the EIC, ACTC,
and child and dependent care credit with and without using the optional
methods to see if the optional methods will benefit you.

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c. Deferred commissions paid after retirement for sales made
before retirement.

you had no other interest in the partnership and didn’t perform services
for it during the year.

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Self-employed health insurance deduction. The optional methods of
computing net earnings from self-employment may be used to figure
your self-employed health insurance deduction. See Form 7206 and its
instructions to determine if your self-employed health insurance
deduction is limited.
Other items affected by adjusted gross income (AGI). Using the
optional methods may decrease your AGI, which may affect your
eligibility for credits, deductions, or other items that are subject to an AGI
limit. Figure your AGI with and without using the optional methods to see
if the optional methods will benefit you.

!

Using the optional methods as described above may be
beneficial, but they may also increase your SE tax.

CAUTION

Changing your method. You can change the method used to figure
your net earnings from self-employment after you file your return. That is,
you can change from the regular to the optional method or from the
optional to the regular method. To do this, file Form 1040-X.

There is no limit on how many years you can use this method.
Under this method, report in Part II, line 15, two-thirds of your gross
farm income, up to $7,240, as your net earnings. This method can
increase or decrease your net earnings from farm self-employment even
if the farming business had a loss.
For a farm partnership, figure your share of gross income based on
the partnership agreement. With guaranteed payments, your share of the
partnership’s gross income is your guaranteed payments plus your share
of the gross income after it is reduced by all guaranteed payments made
by the partnership. If you were a limited partner, include only guaranteed

Nonfarm Optional Method. You may be able to use this method to
figure your net earnings from nonfarm self-employment if your net
nonfarm profits were less than $7,840 and also less than 72.189% of
your gross nonfarm income. Net nonfarm profits are the total of the
amounts from:
• Schedule C (Form 1040), line 31; and
• Box 14, code A, of Schedule K-1 (Form 1065) (from other than farm
partnerships).
To use this method, you must also be regularly self-employed. You
meet this requirement if your actual net earnings from self-employment
were $400 or more in 2 of the 3 consecutive taxable years immediately
preceding the year you use the nonfarm optional method. The net
earnings of $400 or more could be from either farm or nonfarm earnings,
or both. The net earnings include your distributive share of partnership
income or loss subject to SE tax.
You can use the nonfarm optional method to figure your earnings
from self-employment for only 5 years. The 5 years don’t have to be
consecutive.
Under this method, report in Part II, line 17, two-thirds of your gross
nonfarm income, up to the amount on line 16, as your net earnings. But
you can’t report less than your actual net earnings from nonfarm
self-employment.
Figure your share of gross income from a nonfarm partnership in the
same manner as a farm partnership. See Farm Optional Method, earlier,
for details.
Using both optional methods. If you can use both methods, you can
report less than your total actual net earnings from farm and nonfarm
self-employment, but you can’t report less than your actual net earnings
from nonfarm self-employment alone.
If you use both methods to figure net earnings, you can’t report more
than $7,240 of net earnings from self-employment.

5

DRAFT

DRAFT

Farm Optional Method. You may use this method to figure your net
earnings from farm self-employment if your gross farm income was
$10,860 or less or your net farm profits were less than $7,840. Net farm
profits are:
• The total of the amounts from Schedule F (Form 1040), line 34, and
box 14, code A, of Schedule K-1 (Form 1065), minus
• The amount you would have entered on Schedule SE, line 1b, had
you not used the optional method.

payments for services you actually rendered to or on behalf of the
partnership. Whether a partner qualifies as a limited partner for purposes
of self-employment tax depends on whether the partner is considered a
limited partner under section 1402(a)(13).