Social Security income test for self-employed before FRA - which 1040 line counts?

For self-employment income, Social Security looks at your NET earnings from self-employment, not your AGI or taxable income. This is basically your Schedule C profit minus the employer-equivalent portion of your self-employment tax. You'll see this amount calculated on Schedule SE. It's the net profit from your business after expenses, but before the SE tax deduction. If you're expecting $26,000 in gross business income but have legitimate business expenses, your net might be below the $22,320 threshold.

my sister went thru this last yr... the SSA looks at your GROSS earnings before any deductions!! don't let them fool u

I just dealt with this exact situation. The SSA looks at your net earnings from self-employment which comes from Schedule SE. It's basically what you report as subject to self-employment tax. BUT (and this is important) they DO count your gross wages from any W-2 employment separately. So if you're both self-employed AND working a part-time job with a W-2, you'll need to add those W-2 wages to your net self-employment earnings when figuring out if you'll exceed the limit. If you're only self-employed, just look at Schedule SE. If your net is under $22,320, you're fine.

Just as an additional clarification, for self-employment the SSA uses your net earnings after you've deducted all legitimate business expenses but BEFORE the deduction for self-employment tax. For 2025, if you stay under $22,320 in net self-employment earnings, you won't face any benefit reduction. If you go over, they'll deduct $1 for every $2 you earn above the limit. Also important: The month you reach full retirement age, the limit jumps significantly higher (to around $59,520 for 2025), and they only deduct $1 for every $3 over the limit. Then once you hit FRA, there's no limit at all.

I don't know why you're asking this in a Social Security group. This is clearly a tax question, and you should talk to a CPA about tax matters. Social Security people will give you wrong information about taxes.

I've spent HOURS on the phone trying to get a straight answer from SSA about this exact question!! Keep getting disconnected or told different things by different agents. So frustrating!!!! I tried using Claimyr (claimyr.com) and they got me through to an actual SSA agent in about 15 minutes. The agent confirmed it's the net earnings from Schedule SE they look at. They have a video showing how it works here: https://youtu.be/Z-BRbJw3puU Saved me so much time and headache. Worth checking out if you need to speak with SSA directly to confirm for your specific situation.

When I started my SS at 62 (I'm 64 now), I was self-employed part time. I found out they look at what's on Schedule SE, not your AGI or taxable income. The earnings limit is a mess to deal with tho. I ended up making $1200 over the limit one year and they wanted ALL of my January payment back! Then I had to fill out an estimate of this years earnings form. Such a headache.

One more thing to consider - don't forget that the earnings limit is PRORATED in your first year if you don't receive benefits for the full year. For example, if you start benefits in July, you'll only have 6 months of benefits, so your earnings limit for that first year would be half of the annual amount ($11,160 instead of $22,320). This catches a lot of people by surprise!

Just wanted to add my experience as someone who's been dealing with this for a couple years now. The Schedule SE net earnings calculation is definitely what SSA uses, but here's something that might help with your planning: You mentioned expecting around $26,000 in income but having deductions that would lower your AGI. Just remember that business expenses (like equipment, supplies, mileage, etc.) reduce your Schedule C profit, which then flows to Schedule SE. Personal deductions like the standard deduction don't affect your self-employment earnings calculation at all. Also, if you're worried about going over the limit, you can always adjust your work schedule later in the year. I've found it helpful to track my net earnings quarterly so I don't get surprised at tax time. Good luck with your benefits application!

I went through this exact same situation when I started collecting at 62. The confusion is totally understandable because the SSA website really doesn't explain it clearly for self-employed folks! Everyone who said it's your net earnings from Schedule SE is absolutely correct. But here's a practical tip that helped me: when you're calculating your business expenses throughout the year, make sure you're only counting legitimate business expenses that would be deductible on Schedule C. Things like office supplies, equipment, business mileage, etc. Personal expenses or the standard deduction won't help you here. Also, since you're planning to start benefits next month, don't forget about that first-year proration rule someone mentioned. If you start in April, you'll only be able to earn about $16,740 for the rest of 2025 without penalty (9 months worth of the $22,320 annual limit). One last thing - keep really good records of everything! The SSA will want documentation if they ever audit your earnings, and having organized records makes tax time so much easier too.