With the primary form 1040, for salaries/wages, things are explained fairly straight forward: you deduct a Personal Exemption, and you deduct EITHER a Standard Deduction OR an Itemized Deduction of expenses.

But with self-employment tax, I can't find information about how business expenses interact with the 50% self-employment deduction.

Question: can you subtract business expenses on Schedule C-EZ (less than $5,000) to reduce Net Profit AND then take the 50% self-employment deduction on Schedule SE as well? Or are they mutually exclusive?

In simpler terms, is this list of operations correct for self-employment?

  1. Calculate Net Profit by subtracting expenses.
  2. Multiply the Net Profit by ~92% to get the Self-Employment Taxable Income.
  3. Multiply the Self-Employment Tax by 50% to get the Deductible Part of SE Tax?

1 Answer 1


Business expenses reduce business income. The SE tax is paid on business income. The credit for 1/2 the SE tax is based on the amount of SE tax paid.


  1. Take business net revenue
  2. Subtract business expenses to get business income
  3. Compute SE tax on business income
  4. Deduct 1/2 of SE tax

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