Article Date:
June 2024

Word Count:



Self-Employment Taxes for Active Limited Partners

When do limited partners have to pay self-employment taxes on their distributive share of partnership income?


Although limited partnerships have been around for decades, there has never been a definitive answer to this question. But we’re getting close. The IRS and the courts are trying to require active limited partners to pay self-employment tax.


The Limited Partner Exception to Self-Employment Taxes


Self-employment taxes are substantial, and most people want to minimize them. They consist of a 12.4 percent Social Security tax up to an annual income ceiling adjusted for inflation each year ($168,600 for 2024) and a 2.9 percent Medicare tax on all self-employment income (i.e., net earnings from self-employment). Thus, the tax is 15.3 percent up to the ceiling and 2.9 percent thereafter.


If net earnings from self-employment are over $200,000 for single taxpayers, or $250,000 for those who are married filing jointly, self-employed taxpayers must pay a 0.9 percent additional Medicare tax on net earnings from self-employment over the applicable ... Log in to view full article.

Log in to view full article

Already a subscriber?

Email Address


Log In Send me my password

You'll be able to read the full article and get instant access to the last few issues of the Tax Reduction Letter

Not yet a subscriber?
with a money-back guarantee