1. What is Self Employment Tax?

Self Employment Tax is the Social Security and Medicare tax for individuals who work for themselves. It's similar to the taxes withheld from paychecks of wage earners. In 2024, the self employment tax rate is 15.3% of net earnings.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• Net Earnings — Your business income minus expenses
• 0.153 — The 15.3% self employment tax rate (12.4% for Social Security + 2.9% for Medicare)

Explanation: The calculation accounts for your full self employment tax liability before any deductions or credits.

3. Importance of Self Employment Tax

Details: Self employment tax is mandatory for anyone with net earnings of $400 or more from self employment. It funds your future Social Security and Medicare benefits.

4. Using the Calculator

Tips: Enter your net earnings (after business expenses) in dollars. The calculator will compute your estimated self employment tax for 2024.

5. Frequently Asked Questions (FAQ)

Q1: Is there a maximum amount subject to self employment tax?
A: For 2024, only the first $168,600 of net earnings is subject to the Social Security portion (12.4%). All net earnings are subject to the Medicare portion (2.9%).

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

Q3: How often do I pay self employment tax?
A: Typically through quarterly estimated tax payments if you expect to owe $1,000 or more in taxes for the year.

Q4: Are there any exceptions to self employment tax?
A: Certain religious groups and some foreign workers may be exempt under specific circumstances.

Q5: How does this differ from income tax?
A: Self employment tax is separate from federal/state income tax. You may owe both on your net earnings.