Yes, it will always be subject to social security and medicare. The IRA deduction is a deduction against your total income, not just the Schedule C amount. If you have k-1 income that is taxable on your return, it's part of your total income, against which the IRA deduction is applied. If your state does not allow for deductible contributions to an IRA to be subtracted from federal income, then it would not benefit you on such a state return. I want to point out that, while it may not apply to you, if you are receiving an Earned Income Credit, you cannot choose to avoid deducting business expenses if that results in your receiving a higher EIC.
