What is included in Net Earnings From Self Employment?

Net Earnings From Self Employment specifically refers to the income generated from business activities in which an individual is actively engaged. This includes revenue earned from providing services or selling goods, adjusted for any allowable business expenses. For self-employed individuals, this measure is critical as it determines the amount subject to self-employment tax.

Earnings from business activities are treated differently from other sources of income, such as salaries or wages from employment, which are reported separately and not considered part of self-employment income. Similarly, income from investments and passive income sources, like rental income or dividends, do not qualify as net earnings from self-employment unless a business entity is directly involved in managing those investments. Therefore, earnings from business activities accurately encompass those earnings relevant for calculating self-employment taxes, making it the appropriate choice for this question.