To
calculate your self-employment tax, the first step is knowing your net earnings
from self-employment. To calculate your net earnings, subtract your business
expenses from business revenues.
If the result is less than the Social Security wage base. The calculation is simple. If your net earnings are more than the Social Security wage base, your calculation will have a few additional steps. We’ll show you how to calculate your tax either way. If your net earnings are below the Social Security wage base
1. Figure out your net earnings subject to self-employment tax.
Let’s say you had net income from self-employment of $100,000 for 2019. To find the taxable amount, multiply $100,000 by 92.35%. Why 92.35%? Because the 7.65% deduction takes into account the employer-half of your FICA taxes, which the business would deduct if you were paid as an employee.
$100,000 x .9235 = $92,350
2. Calculate your self-employment taxes.
Next, multiply your self-employment taxable income by the 15.3% self employment tax rate.
$92,350 x .153 = $14,130
Your self-employment taxes are $14,130. We’ve rounded the result because the IRS gives you the option of rounding off cents to whole dollaras on your tax return and schedules.
If your net earnings are above the Social Security wage base:
1. Figure out your net earnings subject to self-employment tax.
Let’s say your net earning from self-employment were $150,000 for 2019. Only $132,900 of your earnings are subject to Social Security taxes, so we have to add an extra step in the calculation.
|
|
SOCIAL SECURITY |
MEDICARE |
|
Adjusting earnings |
$132,900 |
$150,000 |
|
Less: self-employment adjustment (x 92.35%) |
0 |
(11,475) |
|
Taxable |
$132,900 |
$138,525 |
2. Calculate your self-employment taxes.
Next, multiply your taxable self-employment earnings by the indivual rates for Social Security (12.4%) and Medicare (2.9%)
|
|
SOCIAL SECURITY |
MEDICARE |
|
Taxable self-employment income |
$132,900 |
$138,525 |
|
xTax Rate (12.4% SS, 2.9% Medicare) |
$16,480 |
$4,017 |
Total self-employment
tax: $16,480 + $4,017 = $20,497
