Self-employed 1099 income vs. net earnings for Social Security earnings limit - FRA confusion

its net income after expenses! i went thru same thing last year. dont worry if ur net is under the limit ur fine

For self-employed individuals, Social Security looks at your net earnings, not gross income. Net earnings are calculated as your gross income from self-employment minus your business expenses, then multiplied by 92.35% (to account for the employer portion of FICA taxes). So if your gross is $75,000 but after expenses it's $58,000, your net earnings for Social Security purposes would be approximately $53,563 (that's $58,000 × 0.9235). This is below the 2025 earnings limit of $62,160 for those under Full Retirement Age, so you should be fine. Just make sure you keep excellent records of your business expenses in case of an audit or review.

WAIT WAIT WAIT. Are you SURE its net??? My brother-in-law got in HUGE trouble with SSA because he thought it was net but they counted his GROSS 1099 income and made him pay back like $8000 in benefits!!! This whole system is rigged to trip people up!!!

This is exactly what im dealing with too! My question is what happens in november when you hit FRA? Can you earn unlimited after that specific month or is it still counted in the yearly total?

I've been dealing with Social Security for years as a self-employed person, and yes, they definitely look at net income, not gross. But here's what tripped me up: they actually look at what's on your Schedule SE, line 6. It's your net profit from Schedule C minus half of your self-employment tax. I spent HOURS on hold with Social Security trying to verify this when I was in your situation. After getting nowhere with their regular phone line, I discovered Claimyr (claimyr.com) which got me connected to an agent in under 5 minutes. They have a video showing how it works: https://youtu.be/Z-BRbJw3puU The agent confirmed it's the net amount on Schedule SE that matters. Saved me a lot of stress since my situation was similar to yours!

I had this EXACT question when I talked to my tax guy last month!!! The thing about self-employment is that you have to look at Schedule SE not just Schedule C. And don't forget they only count earnings up to the month before your FRA. So if your turning 66 in November, they only count January-October earnings towards that limit. If you can push some billing to Nov/Dec that could help too.

my cousin works for ssa and she said always count income the way its on ur tax return. so if u report net on taxes thats what they use

To provide some clarification on the earnings test for self-employed individuals: 1. Social Security counts net earnings from self-employment (NESE), not gross income 2. NESE is calculated on Schedule SE of your tax return 3. For the earnings test in the year you reach FRA, only count earnings in months BEFORE your FRA month 4. For complex situations where you both work and materially participate in a business, the SSA may conduct a "7 test" evaluation to determine if monthly deductions apply In your situation, if your net income after expenses is $58,000, and after multiplying by 0.9235 it's about $53,563, you're under the 2025 limit of $62,160. However, if you expect variability in your income, it's wise to report changes to SSA throughout the year rather than waiting for year-end reconciliation.

Thank you all for the helpful responses! Just to summarize what I've learned: 1. SS counts NET earnings for self-employed people (not gross) 2. It's specifically the amount on Schedule SE line 6 3. They multiply net earnings by 92.35% when calculating for the earnings limit 4. Only earnings before my FRA month (November) count toward the 2025 limit 5. I might be able to shift some income to Nov/Dec to stay under the limit This is such a relief since my net earnings will be under the limit! I'm going to call SSA just to confirm everything (using that Claimyr service someone mentioned since I haven't been able to get through normally). Thanks again for all your help!