Self-Employment Tax Calculator

Understanding the Self-Employment Tax Calculator

If you work for yourself as a freelancer, independent contractor, or small business owner, you are responsible for paying self-employment (SE) tax. This tax covers your Social Security and Medicare contributions, which a traditional employer would typically split with you. This calculator helps you estimate your annual SE tax liability so you can plan for quarterly estimated tax payments.

How It Works

The calculation follows the process outlined by the IRS for determining SE tax.

• Net Earnings from Self-Employment: This is your gross income from your business minus your ordinary and necessary business expenses.

The Calculation

1. First, your taxable earnings are determined. Only 92.35% of your net earnings from self-employment are subject to the tax.
2. Social Security Tax: A 12.4% tax is applied to your taxable earnings, up to an annual limit ($168,600 for 2024).
3. Medicare Tax: A 2.9% tax is applied to all of your taxable earnings, with no income limit.
4. Total Tax: The sum of the Social Security and Medicare taxes.
5. Deductible Portion: The good news is that you can deduct one-half of your total self-employment tax when calculating your adjusted gross income (AGI) for income tax purposes. This calculator shows you that deductible amount.

This tool is essential for self-employed individuals to avoid surprises at tax time and to properly budget for their tax obligations throughout the year.

Frequently Asked Questions