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
Utilities	$4,200
Insurance (other than health)	$1,900
Gain on sale of refrigerator	$475
Fire loss on store building	$1,200
Net operating loss carried over from previous years	$1,500

Some deductions allowed on the Puerto Rico tax return to determine net income from business are not allowed under federal tax law. For self-employment tax purposes, use only deductions allowed under federal tax law.