Earnings Test
How Does the Earnings Test Apply to Self-Employment Income?
Verified against SSA POMS as of September 15, 2026
The short answer
Earnings Test for Self-Employment: For Social Security purposes, net earnings from self-employment are counted in the taxable year they are received. A non-service month is a month in which substantial services are not performed. Services are considered substantial if they exceed 45 hours per month, except for circumstances involving skilled or managerial work.
Defining Self-Employment Income for Earnings Test
According to 20 CFR 404.429, the term “earnings” for the earnings test includes wages plus net earnings from self-employment minus any net loss. Self-employment income must meet coverage under the Social Security program to count under the test (source: RS 02101.820).
20 CFR 404.429 View source ›Calculating Net Earnings for Self-Employment
Net earnings from self-employment are defined in 20 CFR 404.1094. For agricultural trades with gross income up to $2,400, 66 2/3 percent can be reported as earnings; for non-agricultural, 66 2/3 percent of gross income up to $1,600 can be reported. Non-agricultural net earnings must be below $1,600 to use this method.
20 CFR 404.1094 View source ›Exclusions in Self-Employment Earnings
Certain types of earnings and self-employment income do not count under the earnings test. For example, income received after the entitled year that does not relate to services performed after the first month of entitlement is excluded (source: HBK 1812).
HBK 1812 View source ›Defining Substantial Services in Self-Employment
Substantial services, as outlined in HBK 1807, are usually defined by the number of hours or the nature of service. Typically, services under 45 hours are not substantial unless involving high management or skill levels; however, less than 15 hours are never considered substantial.
HBK 1807 View source ›Non-Service Month Rule
A non-service month under HBK 1807 is a month where no substantial services are performed and earnings do not exceed the exempt amount, allowing full benefits for that month.
HBK 1807 View source ›Frequently asked
How does self-employment affect Social Security benefits?
Net earnings from self-employment affect Social Security benefits based on the earnings test, which considers if earnings exceed the exempt amount.
What is a non-service month for self-employed individuals?
A non-service month is any month where substantial services aren't performed and earnings stay below the monthly exempt amount, allowing full benefit payment.
Can self-employed people use optional methods to report income?
Yes, 20 CFR 404.1094 allows options for reporting part of gross income as net earnings if certain conditions are met.
What constitutes substantial services in self-employment?
Services above 45 hours usually count as substantial, but higher-skill jobs may require fewer hours. Services below 15 hours are never substantial.
Are there income exclusions from the earnings test for the self-employed?
Yes, income not attributed to post-entitlement services can be excluded for earnings test purposes.