Methods for Computing Self-Employment Tax (continued)

Regular Method Step 1: Determine Net Profit (continued)

For example, Alyssa, a grocery store owner, has these income and expense items:

Income or Expense Items	Amount
Gross profits from sales	$77,200
Rent paid	$5,400
Heat, light, and telephone	$4,200
Insurance (other than health)	$1,900
Gain on sale of refrigerator	$475
Fire loss on store building	$1,200
Net operating loss carryover	$1,500

To compute taxable income on the Puerto Rico return, all of these items would be considered, as described next.