Note: This value changes annually. The 2023 limit is $160,200, and the 2024 limit is $168,600.
Estimated Self Employment Taxes
$0.00
Understanding Self Employment Taxes
Self-employment tax is a tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners.
The self-employment tax rate is 15.3%. This rate is comprised of two parts:
12.4% for Social Security (up to an annual limit)
2.9% for Medicare (no income limit)
How is it Calculated?
The calculation involves a few key steps:
Determine Taxable Base: You pay self-employment tax on 92.35% of your net earnings from self-employment. This is because the IRS allows you to deduct one-half of your self-employment taxes paid.
Apply Social Security Limit: The Social Security portion (12.4%) is only applied to earnings up to the annual Social Security taxable limit. For 2023, this limit was $160,200. For 2024, it is $168,600.
Calculate Medicare Tax: The Medicare portion (2.9%) is applied to all of your net earnings (after the 92.35% adjustment), with no income limit.
Sum the Taxes: The total self-employment tax is the sum of the calculated Social Security tax and Medicare tax.
Deducting One-Half of SE Tax
A significant benefit for self-employed individuals is the ability to deduct one-half of your self-employment taxes when calculating your adjusted gross income (AGI). This deduction can lower your overall income tax liability. The calculator above provides the total self-employment tax. You can then use one-half of this amount as an above-the-line deduction on your income tax return.
Example Calculation
Let's assume your net earnings from self-employment are $50,000 and the Social Security taxable limit is $160,200 (for 2023).
Taxable Base: $50,000 * 0.9235 = $46,175
Social Security Tax: Since $46,175 is less than $160,200, the full amount is subject to Social Security tax.
$46,175 * 0.124 = $5,725.70
Medicare Tax:
$46,175 * 0.029 = $1,339.08
Total Self Employment Tax: $5,725.70 + $1,339.08 = $7,064.78
Deductible Portion: $7,064.78 / 2 = $3,532.39 (This amount can be deducted from your AGI)
This calculator helps estimate your self-employment tax liability, which is crucial for tax planning and ensuring you set aside sufficient funds.
function calculateSelfEmploymentTax() {
var netEarnings = parseFloat(document.getElementById("netEarnings").value);
var socialSecurityLimit = parseFloat(document.getElementById("socialSecurityLimit").value);
var resultValueElement = document.getElementById("result-value");
var resultDetailsElement = document.getElementById("result-details");
if (isNaN(netEarnings) || netEarnings < 0) {
resultValueElement.innerText = "Invalid Input";
resultDetailsElement.innerText = "Please enter a valid number for net earnings.";
return;
}
if (isNaN(socialSecurityLimit) || socialSecurityLimit < 0) {
resultValueElement.innerText = "Invalid Input";
resultDetailsElement.innerText = "Please enter a valid number for the Social Security limit.";
return;
}
var taxableBaseRate = 0.9235;
var socialSecurityRate = 0.124;
var medicareRate = 0.029;
var taxableBase = netEarnings * taxableBaseRate;
var socialSecurityTaxableAmount = Math.min(taxableBase, socialSecurityLimit);
var socialSecurityTax = socialSecurityTaxableAmount * socialSecurityRate;
var medicareTax = taxableBase * medicareRate;
var totalSETax = socialSecurityTax + medicareTax;
var deductibleSETax = totalSETax / 2;
resultValueElement.innerText = "$" + totalSETax.toFixed(2);
resultDetailsElement.innerText =
"Taxable Base: $" + taxableBase.toFixed(2) +
" | Social Security Tax: $" + socialSecurityTax.toFixed(2) +
" (on $" + socialSecurityTaxableAmount.toFixed(2) + ")" +
" | Medicare Tax: $" + medicareTax.toFixed(2) +
" | Deductible Portion (1/2 SE Tax): $" + deductibleSETax.toFixed(2);
}