How to Calculate SE Tax

Calculating taxes.

Self-employment tax is a tax on the self-employed to cover social security and Medicare taxes. The self-employment tax rate is 15.3%, which is composed of 12.4% for social security and 2.9% for Medicare. Half of the self-employment tax is deductible. If you expect to owe more than $1,000 in taxes, you might need to pay estimated taxes during the year.

Instructions

1. Add together any farm profit or losses, social security benefits, disability benefits, and net profits or losses from sole proprietorship and partnerships.

2. Multiply the number derived in Step 1 by .9235. If Step 1 was $1,000, then $1,000 x .9235 + $923.50. If this number is less than $400, self-employment taxes are not filed.

3. Multiply the number calculated in Step 2 by .153 if the number calculated is less than $106,800. Multiply the number calculated in Step 2 by .029 and add $13,243.20 to the result if the number calculated in Step 2 is greater than $106,800. In the example, $923.50 x .153 = $141.30. If the number was $110,000, then the calculation is $110,000 x .029 = $3,190 + $13,243.20 for a total tax of $16,433.20.

4. Multiply the number calculated in Step 3 by .5 to determine the self-employment deduction. In the example, $141.30 is taxed, but $70.65 is deductible.

References

• IRS: Self Employment Tax
• IRS: Form 1040 Schedule SE