1. What is Self Employment Tax?

Self-employment tax is how independent contractors and business owners pay Social Security and Medicare taxes. It's similar to the payroll taxes withheld from employees' paychecks.

2. How is Self Employment Tax Calculated?

The calculator uses the standard self-employment tax formula:

Where:

• Net Earnings — Your business income minus deductible business expenses
• 0.153 — The combined Social Security (12.4%) and Medicare (2.9%) tax rate

Note: This rate applies to your first $160,200 of net earnings (2023 limit). Medicare tax continues on all earnings, while Social Security tax stops at this threshold.

3. Importance of Calculating Self Employment Tax

Details: Calculating self-employment tax helps you budget for tax payments, make accurate quarterly estimated payments, and avoid penalties for underpayment.

4. Using the Calculator

Tips: Enter your net earnings (after business expenses) in dollars. The calculator will estimate your self-employment tax liability at the standard 15.3% rate.

5. Frequently Asked Questions (FAQ)

Q1: Is the rate always 15.3%?
A: The basic rate is 15.3%, but higher earners may pay an additional 0.9% Medicare tax on earnings above $200,000 (single) or $250,000 (married filing jointly).

Q2: Can I deduct half of my self-employment tax?
A: Yes, you can deduct the employer-equivalent portion (7.65%) when calculating your adjusted gross income.

Q3: When are self-employment taxes due?
A: Typically through quarterly estimated tax payments on April 15, June 15, September 15, and January 15.

Q4: Are there deductions or credits available?
A: You may qualify for the Qualified Business Income Deduction (20% of net business income) and other business deductions.

Q5: How does this differ from income tax?
A: Self-employment tax is separate from federal/state income taxes, which are calculated on your taxable income after deductions.