What is self-employment tax?
Self-employment tax (definition)
Self-employment tax is the name given to Social Security and Medicare taxes when paid by a self-employed person. For employees, the employer shares the cost of these two taxes with the employee. But self-employed workers have to pay both shares.
If your net earnings as a self-employed person are $400 or more during the tax year, you have to pay self-employment tax. The employer half of the self-employment tax is a tax-deductible expense that you can claim separately on your income tax.
Self-employment tax rate breakdown
The self-employment tax rate is 15.3%.
What tax forms to use for self-employment tax
Schedule C of the IRS Form 1040 is used to report self-employed business income or loss. Self-employment tax is calculated on Schedule SE of the same form. The tax is paid quarterly using Form 1040-ES if the estimated liability exceeds $1000.
You can search for experts in our advisor directory
Find an advisor
Sole proprietor accounting software
Read article
Try Xero for free
Sign up today