Self-Employment Tax Calculator

Taxable base = net profit x 92.35 percent. Social Security = 12.4 percent of the base, up to the yearly wage base, counting any W-2 wages first. Medicare = 2.9 percent of the base, with no ceiling. Additional Medicare = 0.9 percent on combined earnings above the threshold for your filing status. Half of the Social Security and Medicare portion is deductible against your income tax.

Why is only 92.35 percent of my profit taxed?

Because an employee never sees the employer half of payroll tax - it is paid before the wage is set. Charging 92.35 percent instead of 100 puts a self-employed person on the same footing. The figure is one minus half of 15.3 percent.

Do I owe this on revenue or profit?

Profit. Deduct your business expenses first: equipment, software, mileage, home office, fees. Every dollar of legitimate expense removes about 15 cents of self-employment tax on top of the income tax it saves.

I have a regular job as well. Do I pay it twice?

Not on Social Security. Your W-2 wages fill the yearly ceiling first, and only what is left of it can be charged on your self-employment profit. Medicare has no ceiling, so its 2.9 percent is charged on all of your profit regardless.

When do I have to pay it?

Quarterly, through estimated payments, usually in April, June, September and January. Nothing is withheld for you, so waiting until you file normally means a penalty for underpayment as well as the bill.

Does forming an S corporation reduce this?

It can. An S corporation pays you a salary, which carries payroll tax, and the remaining profit is distributed without self-employment tax. The salary has to be reasonable for the work, and the setup carries filing costs and payroll costs, so it usually only pays off well above this level of profit. Talk to an accountant before doing it.

Do I owe it if my profit is tiny?

Below 400 dollars of net profit for the year, no self-employment tax is owed. Above that, it starts from the first dollar, not from 400.