Example

Katrina owns a housecleaning business. Last year, her self-employment profit was $21,657. The net earnings subject to self-employment tax were $20,000 ($21,657 multiplied by .9235). Her self-employment tax was $3,060 ($20,000 multiplied by .153). The one-half of the self employment tax (adjustment to income) was $1,530.

Katrina's income that is subject to tax

• increased by $21,657, the self-employment profit.
• decreased by one-half of the self-employment tax, $1,530.

Katrina's total tax increased by $3,060, the self-employment tax.