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

I started collecting Social Security at 63 last year but I've been selling vintage clothing on eBay to supplement my income. Now I'm worried about hitting the earnings limit ($22,320 for 2025, right?). My big question is: what exactly counts toward this limit? If my monthly eBay sales show $2,800 but after eBay fees, shipping costs, and PayPal fees, I only deposit about $1,500 in my bank account - which number does Social Security care about? And what about my other business expenses like inventory costs, storage bins, packaging materials, and the portion of my internet I use for my shop? Can I deduct those too before reporting to SSA? Really don't want to mess this up and get hit with an overpayment notice later. Has anyone dealt with self-employment income while collecting SS benefits before FRA?

0 coins

20 comments

Yara Haddad

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.

0 coins

Amina Sow

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.

0 coins

Amina Sow

Your sister's situation was likely a misunderstanding or error. The official SSA policy is very clear that for self-employment, it's net earnings that count toward the earnings limit, not gross sales. This is directly from SSA's own guidelines for self-employment income. If she was truly charged based on gross sales, she should request a reconsideration with proper documentation of her business expenses. SSA sometimes makes mistakes in how they calculate self-employment income.

0 coins

Connor Murphy

Author

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?

0 coins

Yara Haddad

Good planning! If you exceed the earnings limit, SSA typically withholds future benefit payments until they've recovered the amount you were overpaid. They don't usually send a separate bill. For example, if they determine you were overpaid $3,000 due to excess earnings, and your monthly benefit is $1,500, they might withhold 2 full months of benefits. Sometimes they'll spread it out by withholding a portion of each check over more months. You can also request a payment plan if full withholding would cause financial hardship. The important thing is to report any expected changes in earnings to SSA proactively so they can adjust your benefits accordingly and avoid surprise overpayments.

0 coins

Amina Sow

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.

0 coins

Arnav Bengali

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.

0 coins

Amina Sy

Welcome to the community! Great questions - I'll try to help based on what I've learned: 1. Yes, you'll need to file Schedule C if your net self-employment income is $400 or more for the year. At $15k net, you're definitely required to file it. This is actually good because it creates the official record of your business expenses that both IRS and SSA will recognize. 2. For SSA, I'd recommend calling their main number (1-800-772-1213) and asking to speak with someone about "earnings limits and self-employment income." They should be able to transfer you to the right department. As others mentioned, getting different answers from different reps is unfortunately common, so consider using that Claimyr service someone mentioned if you have trouble getting through. 3. Yes, self-employment tax is calculated on the same net income figure (with a small adjustment for the deductible portion of SE tax). So if your net Schedule C profit is $15k, you'll pay SE tax on roughly that amount, AND that $15k counts toward your SSA earnings limit. The documentation point you made is spot-on - I've seen too many people get burned by poor record keeping. Keep receipts for everything business-related, even small purchases like packaging supplies or printer ink. It all adds up and reduces your taxable/countable income.

0 coins