2007

The maximum amount of net earnings subject to the social security part of the self-employment tax for tax years beginning in 2007 has increased to $97,500. All net earnings of at least $400 are subject to the Medicare part of the tax.

See Publication 334, Tax Guide for Small Businesses, for more information.

--31-JAN-2008

2008

The maximum amount of net earnings subject to the social security part of the self-employment tax for tax years beginning in 2008 has increased to $102,000. All net earnings of at least $400 are subject to the Medicare part of the tax.

Conservation Reserve Program (CRP) payments. CRP payments you receive after 2007 are excluded from net earnings from self-employment when figuring your self employment tax if you are receiving social security benefits for retirement or disability. Qualifying individuals will deduct CRP payments on line 1b of the 2008 Schedule SE (Form 1040).

Optional methods to figure net earnings. Form tax years beginning after 2007, the dollar thresholds for using the optional methods to figure net earnings from self-employment have increased. You may use the farm optional method to figure your net earnings from farm self-employment if your gross farm income was $6,300 or less or your net farm profits were less than $4,548. The nonfarm optional method may be used to figure your net earnings from nonfarm self-employment if your net nonfarm profits were less than $4,548 and also less than 72.189% of your gross nonfarm income.

     In 2008, the maximum social security coverage under the optional methods has increased to four credits, the equivalent of $4,200 of net earnings from self-employment. In future years, the thresholds will be indexed to maintain that level of coverage.

14-MAR-2008

updated 12-SEP-2008