How to Deduct Social Security Payments for Business

If you own a business that has employees, you will have to make half of the social-security tax payments for each employee. Additionally, you will have to pay all of your social-security tax payments as a self-employed person. While paying a lot in social-security taxes is a burden, you can deduct some of those payments to make it easier to bear.

Things You'll Need

• Schedule C tax form
• Schedule SE tax form
• 1040 tax form

Instructions

Deduct Matching Social Security Payments for Employees

1. Keep a record of all matching social-security payments made on behalf of each of the employees of your business. These payments are equal to 7.65 percent of your employee's wages. If your business uses a payroll service, this figure is usually tracked by the service.

2. Add up all matching social-security payments made for the calendar year.

3. Combine these payments with other tax payments and licensing fees, and enter the total on Line 23 of Part II of the Schedule C tax form (see Resources below).

Take a Self-Employed Social Security Tax Deduction

1. Use the Schedule SE form from the IRS to calculate your self-employment tax. Self-employment taxes are FICA taxes for people who are self-employed.

2. Deduct 7.65 percent (half of the total 15.3 percent of your income that you pay towards social security) from your gross income. You can do this quickly by multiplying your income by .9235.

3. Multiply your adjusted gross income by 15.3 percent to figure your self-employment tax amount.

4. Record your self-employment tax on Line 58 of the "Other Taxes" section of your 1040 tax form from the IRS.

5. Deduct 50 percent of your self-employment tax from your taxable income on Line 27 of the "Adjusted Gross Income" section of your 1040 form.

6. Attach your Schedule SE form to your 1040 form and file your taxes.

Tips & Warnings

• Each year there is a maximum amount of your income that is subject to social security tax. Check with the IRS to determine the current cap on taxable social security income.

• Your social security tax cannot be taken as an itemized deduction.

Resources

• Schedule SE tax form from the IRS
• 1040 tax form from the IRS
• Schedule C tax form from the IRS