Self-Employment Taxes
Love being your own boss? Stay compliant with your self-employment taxes with help from our tax experts!
Less Than 2 Minutes Could Save You Thousands.
What is Self-Employment Tax?
Self-employment tax consists of Social Security and Medicare taxes (collectively referred to as FICA). As a self-employed taxpayer, you are responsible for paying this tax. Unlike W-2 employees, who split these taxes with their employers, you are required to pay the entire amount yourself. Fortunately, you can take 50% of your self-employment taxes as a deduction when you file your Form 1040.
Self-Employment Tax Rate
The self-employment tax rate is 15.3% on net earnings. This consists of two parts: 12.4% for Social Security and 2.9% for Medicare. For the 2023 tax year, only the first $160,200 of your combined wages, tips, and net earnings are subject to the Social Security tax. All combined wages, tips, and net earnings are subject to the 2.9% Medicare tax. An additional 0.9% in Medicare tax may apply if your net self-employment earnings exceed the threshold amount for your filing status.
| Filing Status | Threshold Amount |
|---|---|
| Single | $200,000 |
| Head of Household | $200,000 |
| Married Filing Separately | $125,000 |
| Married Filing Jointly | $250,000 |
| Surviving Spouse w/dependent child | $200,000 |
How to Calculate Your Self-Employment Taxes
It’s important to note that only 92.35% of your total net earnings are subject to self-employment tax. To estimate what you’ll owe, follow these steps:
Calculate your net earnings by subtracting your business expenses and deductions from your gross income.
If greater than zero, multiply your net earnings by 0.9235.
Next, multiply that number (step 2) by 15.3% (self-employment tax rate) to determine what you owe.
Although the above calculation can give you a rough estimate of what you may owe, the best way to determine your self-employment tax is to complete Schedule SE (Form 1040). You may also be required to complete Form 8959, Additional Medicare Tax, if your net earnings exceed your filing threshold.
Need help figuring out how much you’ll owe in self-employment taxes? Schedule a free consultation with one of our tax pros and learn more about our tax preparation services.
