Self-Employed Self Employment Taxes – How Much are They and What Do They Include? Read the Article Open Share Drawer Share this:Click to share on Facebook (Opens in new window)Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Pinterest (Opens in new window)Click to print (Opens in new window) Written by Ginita Wall Modified Oct 27, 2020 2 min read You may have heard of self-employment tax and wondered if, and when, it might apply to you. The self-employment tax isn’t complicated: it’s a tax that is a combination of Social Security and Medicare taxes. But many people are confused about when and under what circumstances they might be liable for it. Taxpayers who have an employer are not subject to self-employment taxes. Why? It’s simple – they have Social Security and Medicare taxes withheld from their paycheck. Your employer matches the amount that is withheld from your paycheck and remits those taxes to the government. But, if you decide at some point to work for yourself and run a profitable business, you likely will become liable for self-employment tax. If you incorporate your business and pay yourself a paycheck, then you will be an employee of that corporation and will have taxes withheld from your paycheck, so you won’t owe self-employment tax. The self-employment tax rate is 15.3%, consisting of 12.4% for social security (old-age, survivors and disability insurance) and 2.9% for Medicare (hospital insurance). Paying self-employment tax is easy because it is reported as part of your annual individual tax return. When you file your taxes with TurboTax Self-Employed, your self-employment tax is automatically calculated based on your net profit (business income minus business expenses). In general, you have to file an income tax return if your net earnings from self-employment were $400 or more. Though all of your net income (profits) from the business are subject to the Medicare portion of the self-employment tax, only the first $137,700 of your net income is subject to the Social Security portion for tax year 2020. The self-employment tax rate is twice the tax rate that is imposed on employees for Social Security and Medicare taxes. That’s because you are paying both the employee portion and the matching employer portion. For that reason, the government gives you a tax deduction for half of the self-employment tax your owe, thus reducing your taxable income. Don’t worry about knowing these tax laws. TurboTax Self-Employed will ask you simple questions about you and your business and give you the tax deductions and credits you are eligible for. When you use QuickBooks Self-Employed you can track your income, expenses, mileage, and capture your receipts year-round. At tax time, you can easily export your information to TurboTax. Previous Post Are You Self-Employed and Don’t Know? [INFOGRAPHIC] Next Post Social Media Tips for Your Small Business Written by Ginita Wall More from Ginita Wall Leave a Reply Cancel reply Browse Related Articles Tax Planning Payroll Tax Defined ( What It Is & How Much Is It) Self-Employed How Much are Medicare Deductions for the Self-Employed? Self-Employed I Only Received One Paycheck from My Summer Side-Gig. A… Self-Employed Top 5 Self-Employed Tax Questions Self-Employed How to Determine My Federal Income Tax Rate If I’… Self-Employed How Holiday Bonuses are Taxed for Contract Workers Self-Employed How to Report Self-Employment Income When You Have Mult… Self-Employed Moving from Employee to Self-Employed? Here’s What it… Self-Employed Self-Employed Tax Tips & Summer Jobs Self-Employed Does Tutoring Make Me Self-Employed?