While employees and employers pay Social Security and Medicare taxes under FICA, self-employed individuals pay it under self-employment tax. Use the calculator down below to see how much you will have to pay in self-employment tax and your income subject to it.
First and foremost, not all of the earnings coming from self-employment is subject to tax. Generally, the business expenses must be subtracted from the gross income to find the income subject to self-employment tax. So you won’t pay a self-employment tax for all of your earnings from self-employment.
In addition to subtracting business expenses from net earnings, there are other ways to figure out income subject to self-employment tax. There is the optional method but not everyone is eligible. Take a look at the Form 1040-SE instructions to see if you’re eligible.
If only a portion of your income is from self-employment or had a loss, you may be eligible for the optional method. The perks of calculating self-employment tax based on the optional method is a larger earned income tax credit and child and dependent care credit. It also gives credit toward Social Security coverage.
2024 Self-Employment Tax Rate
Two separate taxes make up the self-employment tax. These are the Social Security tax and Medicare tax. Same as the FICA tax, the rates are 12.4% for Social Security and 2.9% for Medicare.
The rates shown above is more than what employees and employers pay individually. Since self-employed individuals must pay both the employer and the employee portion, the rates are 12.4% and 2.9%. On the other hand, employees and employers pay 6.2% and 1.45%.
Having said that, the total self-employment tax burden is 15.3% of income after business expenses are subtracted from gross income.
Self-Employment Tax Calculator
Below, enter the amount subject to self-employment income tax. If you earned income outside of self-employment, enter that as well. Earning a significant amount from your employer may reduce the self-employment tax your self-employment income subject to significantly.
E.g
Assume you earned $100,000 during the course of 2024 and about $30,000 from an hourly job you work at. When combined together, the self-employment tax you will pay will be drop down by more than half. So if there is income from a W-2, it will surely reduce the amount you pay in self-employment tax.