What is the Self-Employment Tax?
When earning self-employment or independent contractor income, you will be responsible for self-employment tax if your net earnings are greater than $400. This is essentially the equivalent of FICA tax that you would see withheld on a W-2 wage statement when you work as an employee. The self-employment tax rate is 15.3% (combining 12.4% for Social Security and 2.9% for Medicare). Generally, when working as an employee, your employer will pay half of this tax and you will pay the other half.
Can I claim the self-employment tax deduction?
When you are self-employed, you are responsible for the full self-employment tax amount. However, the good news is that you can deduct the portion that an employer would normally pay (50%) when calculating your adjusted gross income.
If your net self-employment earnings are more than $400 (excluding church employee income, if applicable), a Schedule SE is required. When you complete a Schedule C or F, both the Schedule SE and the SE tax deduction will automatically be generated by the program.
Note: This deduction will adjust your income tax. It does not change your net earnings amount used to calculate the self-employment tax.
Additional Information
- For more information on the self-employment tax and the self-employment tax deduction, click Here
- For more information on completing a Schedule C, click Here
- For more information on completing a Schedule F, click Here