Earned Income Calculation

[Guest notapensiongeek]

This is probably a dumb question, but I'll ask it anyway.

I am running an earned income calculation for a partnership. There are two partners (50-50), each has K-1 self-employment earnings of $120,321 (line 14A); however, they both have a Section 179 deduction (Line 12) of 1,656. When calculating the partners' earned income, do I subtract the 179 deduction from their self-employment earnings or not? I guess my question is: is my starting point $120,321 less the staff's contribution, etc. or is it $118,665? I've seen it done both ways, but I don't know which way is right.

Thanks for your help! Any input would be greatly appreciated.

[Guest CharlieLaur]

I have also seen it done both ways but my understanding is that the Section 179 number should be subtracted from the partner's earned income.

[Archimage]

Yes, that is correct.

[Guest notapensiongeek]

Thank you both!! ;-)