GLOSSARY · TAX & ESTATE
Self-employment tax
The Social Security and Medicare tax that self-employed people pay on their net earnings, covering both the employee and the employer share. It applies to 92.35% of net profit at a combined 15.3%, with the Social Security part capped at a yearly wage base shared with any wages. Half of it can be deducted when working out income tax.
Also called: SE tax, SECA tax, Schedule SE tax, Social Security and Medicare tax for the self-employed, 1099 tax, Schedule SE
FORMULA
Self-employment tax ≈ net profit × 92.35% × 15.3% (Social Security part only up to the wage base)
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CHAPTER · TAX PLANNING FUNDAMENTALS · FOUNDATIONSTaxes on Side Income and Multiple Income StreamsCHAPTER · TAX PLANNING FUNDAMENTALS · FOUNDATIONSWithholding and Quarterly Estimated TaxesRELATED TERMS
SOURCES
- Topic No. 554, Self-employment tax. Internal Revenue Service.
- Topic no. 554, Self-employment tax. Internal Revenue Service.