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Last Updated on June 8, 2022 by coffeepo
When you’re self-employed, it’s important to stay on top of your taxes. One tax you need to be aware of is the self-employment tax. This tax is made up of both Social Security and Medicare taxes, and it’s paid by people who are self-employed. If you’re not sure how to calculate self-employment tax, don’t worry! We’ll walk you through it.
Self-employment tax is calculated as a percentage of your net income from self-employment. For 2021, the self-employment tax rate is 15.3%. This means that you’ll owe $15.30 in self-employment tax for every $100 of net income you earn from self-employment.
To calculate your self-employment tax, you’ll first need to calculate your net income from self-employment. To do this, simply subtract any business expenses from your total income. Once you have your net income figure, multiply it by the self-employment tax rate of 15.3%. This will give you your total self-employment tax liability.
For example, let’s say you earned $50,000 from self-employment in 2021. After subtracting business expenses, your net income is $40,000. To calculate your self-employment tax liability, you would multiply $40,000 by 0.153, which equals $6,120.
If you’re required to pay self-employment tax, you’ll need to file a quarterly tax return. This return is due on the 15th of April, June, September, and January. When you file your return, you’ll need to include a Schedule SE, which is used to calculate self-employment tax.
Don’t worry if this all sounds confusing! There are plenty of resources available to help you calculate self-employment tax. The IRS offers a helpful Self-Employment Tax Calculator on its website. You can also consult with a tax professional if you have any questions.
Final Thoughts
Self-employment tax can be a significant expense, but it’s important to remember that it goes towards funding important programs like Social Security and Medicare. If you have any questions about self-employment tax, be sure to consult with a tax professional.
