What is Self-employment tax for partners?
In short
General partners pay self-employment tax on their share of a partnership's trade or business income plus guaranteed payments. Limited partners pay it only on guaranteed payments for services they perform.
Key takeaways
- Courts look at what a limited partner actually does, not just the label, so active owners may not qualify for the exception.
- Members of limited liability companies who manage the business are generally treated like general partners.
- Rental income and most investment income are excluded.
Where it's tested
TCP: Partnership Compliance & Planning — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Which partner is generally NOT subject to self-employment tax on a distributive share of ordinary business income?