Self-employment tax is a tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves. It's similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. For 2023 and 2024, the self-employment tax rate is 15.3% on the first $160,200 of earnings (for 2023) or $168,600 (for 2024) and 2.9% on all earnings above that threshold.
The calculation for self-employment tax is a bit more involved than a simple percentage of your income. Here's a breakdown of how it's calculated:
Net Earnings from Self-Employment: You first calculate your net earnings from self-employment. This is your gross business income minus your deductible business expenses.
Deductible Portion of SE Tax: You can deduct one-half of your self-employment tax. To figure this out, you multiply your net earnings from self-employment by 92.35% (or 0.9235). This is the amount that's subject to the self-employment tax.
Calculating the SE Tax: The tax is calculated on this 92.35% of your net earnings. For the Social Security portion, the rate is 12.4% up to the annual limit ($160,200 for 2023, $168,600 for 2024). For the Medicare portion, the rate is 2.9% on all net earnings subject to SE tax.
Deducting Premiums and Contributions: Self-employed health insurance premiums and one-half of self-employment tax are generally deductible as adjustments to income, which can reduce your taxable income. Retirement contributions (like Keogh plans or SEPs) are also deductible. These deductions are subtracted from your gross income before calculating your AGI, but the calculation of the SE tax itself is based on 92.35% of your net earnings.
Example Calculation:
Let's say you have:
Gross Business Income: $50,000
Deductible Business Expenses: $5,000
Self-Employed Health Insurance Premiums: $3,000
Self-Employed Retirement Contributions: $6,000
In this example:
Net Earnings Subject to SE Tax = ($50,000 – $5,000) * 0.9235 = $41,557.50
Total SE Tax = $41,557.50 * 0.153 (for earnings below the limit) = $6,358.30
Deductible Portion of SE Tax = $6,358.30 / 2 = $3,179.15
The calculator above will show you the estimated Total Self-Employment Tax and the Deductible Portion of SE Tax. The other premiums and contributions are typically deducted to reduce your overall taxable income (AGI).
Disclaimer: This calculator is for informational purposes only and does not constitute tax advice. Tax laws can be complex and change frequently. Consult with a qualified tax professional for personalized advice.
function calculateSelfEmploymentTax() {
var grossIncome = parseFloat(document.getElementById("grossIncome").value);
var businessExpenses = parseFloat(document.getElementById("businessExpenses").value);
var healthInsurance = parseFloat(document.getElementById("healthInsurance").value);
var retirementContributions = parseFloat(document.getElementById("retirementContributions").value);
var resultDiv = document.getElementById("result");
resultDiv.style.display = "none"; // Hide previous result
// Validate inputs
if (isNaN(grossIncome) || grossIncome < 0 ||
isNaN(businessExpenses) || businessExpenses < 0 ||
isNaN(healthInsurance) || healthInsurance < 0 ||
isNaN(retirementContributions) || retirementContributions grossIncome) {
resultDiv.innerHTML = "Business expenses cannot exceed gross income.";
resultDiv.style.display = "block";
resultDiv.style.backgroundColor = "#f8d7da";
resultDiv.style.color = "#721c24";
return;
}
// Constants for 2023/2024 tax year (approximate, adjust if needed)
// For simplicity, using a fixed rate; actual calculation involves Social Security limits.
// We'll use the standard 15.3% for simplicity in this calculator.
var seTaxRate = 0.153; // 12.4% SS + 2.9% Medicare
var netEarningsMultiplier = 0.9235;
var netEarnings = grossIncome – businessExpenses;
// Calculate earnings subject to SE tax
var taxableSEIncome = netEarnings * netEarningsMultiplier;
// Calculate total SE tax
// Note: This simplified calculation does not account for the SS limit.
// A more complex calculation would break down SS and Medicare separately.
var totalSETax = taxableSEIncome * seTaxRate;
// Calculate the deductible portion of SE tax
var deductibleSETax = totalSETax / 2;
// Total potential deductions (SE tax deduction + others) for AGI
var totalDeductionsForAGI = deductibleSETax + healthInsurance + retirementContributions;
resultDiv.innerHTML = `
Total Estimated Self-Employment Tax: $${totalSETax.toFixed(2)}
Deductible Portion of SE Tax: $${deductibleSETax.toFixed(2)}Total Deductions for AGI (incl. SE Tax deduction, health ins., retirement): $${totalDeductionsForAGI.toFixed(2)}
`;
resultDiv.style.display = "block";
resultDiv.style.backgroundColor = "var(–success-green)";
resultDiv.style.color = "var(–white)";
}