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How to Calculate Self-Employment Tax
- The state tax rate is 5% for income over $8,000.
- Those self employed pay 12.4% to Social Security and 2.9% to Medicare on net earnings.
Tax Calculation and Deductions
- To calculate gross income, add up total sales revenue, then subtract refunds and cost of goods sold.
- Taxpayers can lower SE taxes they pay by using deductions to lower net income.
Tax Rates and Payments
- The total self-employment tax rate is 15.3%, with 12.4% for Social Security and 2.9% for Medicare.
Self-Employment Tax Estimation
- For the 2023 tax year, expect to pay 15.3% of your net freelance income in self-employment taxes. That comes out to 12.4% for Social Security taxes and 2.9% on Medicare taxes.
- Every self-employed person has to pay self-employment taxes on their self-employment earnings of $400 or more.
Who Has to Pay Self-Employment Tax
- In general, you have to pay self-employment tax if either of these things are true during the year: You had $400 or more in net earnings from self-employment.
Estimated Tax Payments
- According to the IRS, self-employed taxpayers who expect to owe more than $1,000 in self-employment tax must make estimated tax payments four times during the year.
Self-Employment Tax Details
- Self-employment tax is money paid to the federal government to fund Social Security and Medicare.
- The self-employment tax rate for 2023 is 15.3 percent, which encompasses the 12.4 percent Social Security tax and the 2.9 percent Medicare tax.
- In other words, self-employed people must pay the full 15.3% to cover their Social Security and Medicare obligations.
