Do business expenses reduce earned income? Can I make a Roth IRA contribution if earned income is over 5500 but expenses are greater than earned income?

[ksk811]

I want to make a Roth IRA contribution but expenses are greater than earned income.  Can I still make a contribution or will I be charged the 6% fee?

[VolvoGirl]

Yes business expenses DO reduce earned income.  Your earned income is the Net Profit on schedule C minus half of the self employment tax on the profit.  So actually it's a little less than the Net Profit.  If you have a Net Loss it doesn't count at all for earned income and I think will even reduce earned income from any W2 wages you might have.

[SweetieJean]

and remember that you are required to claim all of your business expenses.