Social Security earnings limit confusion - gross eBay sales vs. net income when under FRA

Good news - it's your net self-employment income that counts toward the earnings test, not your gross sales. The Social Security Administration looks at your net earnings from self-employment (what you'd report on Schedule C of your tax return). Basically, you take your gross sales, then subtract all your legitimate business expenses (eBay/PayPal fees, shipping costs, cost of goods, supplies, the business portion of your internet, etc.). That final number is what counts toward your earnings limit. Make sure you keep excellent records of all your business expenses in case you're ever asked to verify your earnings. The SSA can check your reported income against what you file on your tax returns.

i had kind of the same issue with my etsy shop last yr. my tax guy told me its waht ends up on ur tax form that matters, not whats in ur bank. so yeah eBay fees and all ur expenses should come off first.

While the others are correct about net earnings being what counts, I want to add that the monthly earnings test only applies in your first year of receiving benefits. After that, SSA switches to an annual test. So if you started collecting last year, SSA now looks at your annual earnings for 2025, not month-by-month. This means you could earn more during certain months as long as your total for the year stays under the limit. Also, if you do exceed the annual limit, SSA will withhold $1 in benefits for every $2 you earn over the limit. They don't just cut off your benefits completely. Keep detailed records of all business expenses - inventory costs, percentage of internet used for business, mileage if you drive to purchase inventory or ship items, etc. These all reduce your net earnings for SSA purposes.

I went through this EXACT same thing with my Poshmark store!!! It's definitely net profit not gross sales that count. But GET THIS - I spent 3 DAYS trying to get through to someone at Social Security to confirm and kept getting disconnected or waiting for hours!!! SO FRUSTRATING!!!

my sister got in BIG trouble last year because she thought it was net but SSA said it was gross!!! they made her pay back like $6000!!! be careful!!!

Thank you all for the responses! I feel much better now. I'm going to make sure I keep detailed records of all my expenses and make sure my Schedule C is properly filled out. And I'll double-check that SSA is using my net income, not gross sales when they look at my earnings test. I've been setting aside money just in case I do go over the limit. Does anyone know how SSA actually collects if you exceed the earnings limit? Do they send a bill, reduce future payments, or something else?

Just be SUPER careful with all of this!! My husband went through HELL with Social Security over his small business income! Make sure you CALL THEM and get something IN WRITING about how they're counting your income. Don't just assume they'll do it right!!! And document EVERYTHING - who you talked to, when, what they said. The right hand doesn't know what the left is doing over there!!!

One more important tip - if this is your first year of having self-employment income while receiving benefits, I strongly recommend you make quarterly estimated tax payments. This helps in two ways: 1. It creates a clear record of how you're calculating your net income 2. It prevents you from facing a large tax bill (plus possible penalties) next April You can use Form 1040-ES to make these payments. Also, consider getting an accountant who specializes in self-employment if you don't already have one. The fee is deductible as a business expense and they can help ensure you're calculating everything correctly for both tax and Social Security purposes.

one more thing - dont forget about self employemnt tax!! u pay both halves of FICA when ur self employefd and that can be a big surprise if u dont know about it

This thread has been incredibly helpful! As someone new to collecting SS while running a small business, I had no idea about so many of these details. A few questions based on what I've read: 1. When you all mention "Schedule C" - is that something I need to file even if my eBay income is relatively small? I'm probably looking at around $15k net for the year. 2. For those who've dealt with SSA directly about this - did you call the main number or is there a specific department for earnings/self-employment questions? 3. The self-employment tax mentioned at the end caught my attention - is that calculated on the same net income figure that counts toward the SSA earnings limit? I'm definitely going to start keeping much better records after reading all of this. It sounds like documentation is absolutely critical if there are ever any disputes with SSA about how income should be calculated.

Just wanted to add something that helped me a lot when I was dealing with similar concerns about my small business income and SS benefits - make sure you understand the difference between "earnings" and "income" in SSA's eyes. For self-employment, they look at your net earnings from self-employment (what goes on line 31 of your 1040), but there's actually a small calculation involved. You get to deduct half of your self-employment tax from your net profit before it counts toward the earnings limit. So if your Schedule C shows $15,000 net profit, you'll pay SE tax on that (about $2,118), then you can deduct half of that SE tax ($1,059) from the $15,000, meaning only $13,941 would count toward your $22,320 earnings limit. It's a small thing but every bit helps when you're trying to stay under the limit! Your tax software should calculate this automatically, but it's good to understand how it works.

This conversation has been incredibly informative! I'm in a similar situation - just started collecting SS at 62 and have been doing freelance graphic design work. I was panicking thinking my gross invoices would count toward the earnings limit, but now I understand it's the net profit after business expenses. One thing I wanted to add that might help others - if you're using online platforms like eBay, Etsy, or Poshmark, they usually provide year-end tax documents (1099-K) that show your gross sales. But as everyone has emphasized, this gross amount is NOT what counts for SSA purposes. You still get to deduct all your legitimate business expenses. I've started using a simple spreadsheet to track monthly: gross sales, platform fees, shipping costs, supplies purchased, and other business expenses. This makes it easy to see my actual net profit and helps me stay on top of whether I'm approaching the earnings limit. Also wanted to echo what others said about keeping receipts for everything. I even photograph receipts with my phone and store them in a dedicated folder just in case I lose the paper copies. The IRS and SSA can ask for documentation going back several years, so good record-keeping is absolutely essential. Thanks to everyone who shared their experiences - both the success stories and the cautionary tales. It really helps to learn from others who've navigated this process!