Department of the Treasury

Internal Revenue Service

2023 Instructions for Schedule SE

Self-Employment 

Tax

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.

Section references are to the Internal Revenue Code unless 

otherwise noted.

Future Developments

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 2023, 

the maximum amount of self-employment income subject to 

social security tax is $160,200.

Form 1040-SS, Part V and Part VI, have been replaced. 

For 2023, Schedule SE (Form 1040) is available to be filed 

with Form 1040-SS, if applicable. For additional information, 

see the Instructions for Form 1040-SS.

General Instructions

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 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).

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Who Must Pay Self-Employment (SE) Tax

Self-Employed Persons

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.

You must also pay SE tax on your share of certain partnership income and your guaranteed payments. See Partnership 

Income or Loss, later.

Employees of Churches and Church Organizations

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.

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, enter “Exempt—Form 4361” on Schedule 2 (Form 1040), line 4. 

However, if you had other earnings of $400 or more subject to 

SE tax, see line A at the top of Schedule SE.

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:

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Dec 22, 2023 Cat. No. 24334P SE-1
• 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.

See Pub. 517 for additional details regarding social security 

for members of the clergy and religious workers.

Members of Certain Religious Sects

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. Instead, enter “Exempt—Form 4029” on Schedule 2 (Form 1040), line 4. See 

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, other than Canada or Italy, 

your work for the government of that foreign country is always 

exempt from U.S. social security taxes. For further information 

about these agreements, see the exception shown in the next 

section.

U.S. Citizens or Resident Aliens Living Outside the 

United States

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 enter “Exempt, see attached statement” on Schedule 2 (Form 1040), line 4.

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 estate. However, you (not the bankruptcy estate) are responsible for paying 

SE tax on your net earnings from self-employment.

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.

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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, enter “Exempt community income” on 

Schedule 2 (Form 1040), line 4. Don’t file Schedule SE.

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.

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 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.

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.

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.

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.

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Enter all negative amounts in (parentheses).

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.

* 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.

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.

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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.

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 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 land diversion 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 

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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

c. Deferred commissions paid after retirement for sales 

made before retirement.

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, 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 you had no other interest in the partnership and 

didn’t perform services for it during the year.

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.

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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 $6,560. 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.

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.

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.

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.

Farm Optional Method

You may use this method to figure your net earnings from farm 

self-employment if your gross farm income was $9,840 or less 

or your net farm profits were less than $7,103. 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

CAUTION

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• The amount you would have entered on Schedule SE, 

line 1b, had you not used the optional method.

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 $6,560, 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 

payments for services you actually rendered to or on behalf of 

the partnership.

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 $7,103 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 years 

before 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 $6,560 of net earnings from self-employment.

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