1. What is Self Employment Tax?

Self Employment Tax is the Social Security and Medicare tax for individuals who work for themselves. It's similar to the payroll taxes withheld from employees' paychecks.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• 15.3% = 12.4% for Social Security + 2.9% for Medicare
• Net Earnings = Your business profit after expenses

Note: Only the first $160,200 (2023 limit) of net earnings is subject to the Social Security portion.

3. Importance of Calculating SE Tax

Details: Self-employed individuals must pay SE tax to qualify for Social Security and Medicare benefits. It's also required by law and paid through quarterly estimated taxes.

4. Using the Calculator

Tips: Enter your net earnings (business income minus expenses) in dollars. The calculator will compute your estimated SE tax liability.

5. Frequently Asked Questions (FAQ)

Q1: Is the rate always 15.3%?
A: The basic rate is 15.3%, but high earners may pay an additional 0.9% Medicare tax on earnings above $200,000 (single) or $250,000 (married).

Q2: Can I deduct half of SE tax?
A: Yes, you can deduct the employer-equivalent portion (7.65%) when calculating your adjusted gross income.

Q3: When is SE tax due?
A: Typically paid quarterly (April, June, September, and January) as part of estimated tax payments.

Q4: Are there exceptions?
A: Religious group members and certain foreign workers may be exempt. Consult a tax professional.

Q5: How does this differ from income tax?
A: SE tax is separate from federal/state income taxes and must be calculated/paid in addition to them.