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.
As a self-employed individual, you are responsible for paying both the employer and employee portions of these taxes. The current rates are 12.4% for Social Security (up to an annual earnings limit) and 2.9% for Medicare (no limit). This totals 15.3% on net earnings from self-employment.
How the Calculator Works:
The calculation involves a few key steps:
Net Earnings: This is your gross income from self-employment minus your allowable business expenses. The calculator uses your input for this value.
Taxable Base: You are allowed to deduct one-half of your self-employment taxes when calculating your taxable income for income tax purposes. However, for calculating the self-employment tax itself, the tax is generally applied to 92.35% of your net earnings. This calculator simplifies by directly using net earnings and then applying the tax rate.
Self-Employment Tax Rate: The Social Security tax rate is 12.4% and the Medicare tax rate is 2.9%. The total is 15.3%. The calculator applies this rate.
Deductible Portion: You can deduct one-half of your self-employment taxes from your income for income tax purposes. This is applied to the calculated self-employment tax.
The Formula:
Estimated Self-Employment Tax = Net Earnings * 15.3%
Deductible Portion for Income Tax = Estimated Self-Employment Tax * (Deductible Portion Percentage)
Note: This calculator provides an estimate. Actual tax liabilities can be affected by various factors, including income thresholds for Social Security tax, other income sources, and specific tax laws. Consult with a tax professional for personalized advice.
Example:
Let's say you have Net Earnings from Self-Employment of $50,000.
The total self-employment tax rate is 15.3%.
Your estimated self-employment tax would be: $50,000 * 15.3% = $7,650.
The deductible portion of this tax for your income tax return is typically 50%.
Deductible amount = $7,650 * 50% = $3,825.
So, your estimated self-employment tax is $7,650, and you can deduct $3,825 from your income when calculating your regular income tax.
function calculateSelfEmploymentTax() {
var netEarningsInput = document.getElementById("netEarnings");
var deductiblePortionInput = document.getElementById("deductiblePortion");
var resultDiv = document.getElementById("result");
var resultValueDiv = document.getElementById("result-value");
var resultDetailsDiv = document.getElementById("result-details");
var netEarnings = parseFloat(netEarningsInput.value);
var deductiblePortionPercentage = parseFloat(deductiblePortionInput.value);
// Clear previous results
resultDiv.style.display = 'none';
resultValueDiv.textContent = ";
resultDetailsDiv.textContent = ";
// Validate inputs
if (isNaN(netEarnings) || netEarnings < 0) {
alert("Please enter a valid number for Net Earnings.");
return;
}
if (isNaN(deductiblePortionPercentage) || deductiblePortionPercentage 1) {
alert("Please enter a valid number for the Deductible Portion (between 0 and 1, e.g., 0.5 for 50%).");
return;
}
// Constants
var socialSecurityRate = 0.124; // 12.4%
var medicareRate = 0.029; // 2.9%
var totalSETaxRate = socialSecurityRate + medicareRate; // 15.3%
// Calculation
// Note: For SE tax calculation, it's technically applied to 92.35% of net earnings.
// For simplicity and common calculator practice, we'll calculate on net earnings first,
// then mention the 92.35% base if needed or directly apply the effective rate for common understanding.
// A more precise calculation would be: taxBase = netEarnings * 0.9235;
// However, many people and simpler calculators use net earnings directly as the base for the 15.3% rate.
// We will use net earnings directly for simplicity in this calculator's primary output for SE Tax.
var estimatedSETax = netEarnings * totalSETaxRate;
var deductibleAmount = estimatedSETax * deductiblePortionPercentage;
// Formatting currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
});
resultValueDiv.textContent = formatter.format(estimatedSETax);
resultDetailsDiv.textContent = "Deductible for Income Tax: " + formatter.format(deductibleAmount);
resultDiv.style.display = 'block';
}