This is how has to be calculate: example gross income $60,000, exempt $50,000. This yields a percentage of 83.33 ($50,000 divided by $60,000). if net profit is $40,000 need apply the percentage of 83.33 yields $33,332 and this is the amount to be claimed as not subject to self employment tax. I was 2 hours on the phone with IRS agent and he confirm this formula. He indicate it is specify on publication 334 |