1. What is Self-Employment Tax?

Self-employment tax is how independent contractors and business owners pay into Social Security and Medicare. For 2025 (assuming rates stay the same as 2024), the self-employment tax rate is 15.3% (12.4% for Social Security and 2.9% for Medicare).

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( Net\ Earnings \) — Your business income minus deductible business expenses
• \( 0.153 \) — The combined 15.3% self-employment tax rate

Note: This calculation is for the basic self-employment tax. Additional Medicare taxes may apply for high earners.

3. Importance of Self-Employment Tax

Details: Self-employed individuals must pay this tax to contribute to Social Security and Medicare systems. Unlike employees who split this cost with employers, self-employed individuals pay the full amount.

4. Using the Calculator

Tips: Enter your net earnings (after business expenses) in USD. The calculator will estimate your self-employment tax liability for 2025.

5. Frequently Asked Questions (FAQ)

Q1: Is the rate definitely 15.3% for 2025?
A: While rates are expected to remain the same, always verify with the IRS as tax laws can change.

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

Q3: Are there income limits for Social Security tax?
A: Yes, Social Security tax only applies up to the annual maximum taxable earnings ($168,600 in 2024 - check 2025 limits).

Q4: Do I need to make estimated tax payments?
A: Generally yes, if you expect to owe $1,000 or more in tax for the year.

Q5: What if I have both W-2 and self-employment income?
A: Your W-2 income may affect how much Social Security tax you owe on self-employment income.