Self-Employment Tax Calculator

I'm self-employed. How much do I owe in Self-Employment Taxes? How much can I contribute to an IRA?

This calculator provides answer to both of these questions, and more.

Net Earnings Calculator

Input

Output

$0 $0 $0 $0

Summary

Usage

Inputs:

Year: Your tax year. This is only important if total incomes exceeds the SS wage base.
Business Profit: Total self-employment income from all sources, minus business expenses.
Day Job Income: If you also have W2 employment, include that income here.

Outputs:

Income subject to self-employment taxes: 92.35% of the Business profit input.
SE Taxes: The calculated sum of self-employment taxes based on business profit and day job income.
1/2 SE Taxes: 50% of the calculated SE taxes. This is the deductible portion.
Net Earnings: Business profit - 1/2 SE taxes.

Background

When we work for a company, payroll taxes are evenly split between the employee and employer. As a sole-proprietor (or owner of an LLC taxed as such) we pay both halves of this tax, now referred to as Self-Employment taxes (calculated on Schedule SE.)

Since we now pay the "employer" portion ourselves, we get a tax deduction for that half of the payment. This must be taken into account when determining our maximum IRA contribution, which is limited to our net earnings.

Income subject to SE taxes = Business profit * 92.35% (Or 1 - 7.65%, the employer payroll tax percentage.)

Self-employment tax = Net income * 15.3%. Half of this amount is deductible.

Net earnings = Business profit - 1/2 SE taxes

Considerations

Self-employment tax consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance). The social security portion applies only to the SS wage base ($132,900 in 2019.) Medicare tax applies to all earned income.

If income subject to SE taxes is less than $400, no self-employment taxes are due.

This calculator does not include the additional Medicare tax of 0.9% that applies at higher income levels (over $250,000 for MFJ in 2019.)

Reduce Self-Employment Taxes

To reduce self-employment taxes (and all taxes, really) we need to take advantage of every possible business deduction. Refer to these posts for ideas and additional information:

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9 Comments

  1. Axel F

    Running my numbers for 2019 it seems that by adding business expense deductions, I decreases my profit sharing potential into my solo 401k. The added self employment tax seems like a small price to pay to be able to add more to my retirement account. Am I missing something here?

    Reply
    • Go Curry Cracker

      Taxes on business deductions: $0
      Taxes on solo 401k withdrawals: more than $0

      Reply
  2. Cat

    Thank you for this tool! So useful :)

    Reply
  3. Fei Wang

    Do you pay estimated quarterly taxes? I have an LLC taxed as partnership and my account currently has us paying 110% of prior year income for estimated quarterly earnings but this year I’m drastically reducing my working hours on the way to retirement. Any tips on calculating quarterly tax estimates? Thanks!

    Reply
    • Go Curry Cracker

      Every quarter I add up all income and subtract all expenses – I just keep this stuff in a spreadsheet – and then calculate tax due from there.

      Reply
  4. Alex

    Here’s something I need to understand better: my solo 401k providers wrote this to address my questions on contribution limits to the solo 401k from a side gig with the consideration of a day job salary over the SS Wage Base.
    “The contribution limit is based on the self-employment tax that would be payable without regard to the self-employment tax that he in fact paid which is lower because he has a W-2 job. Otherwise, self-employed persons with W-2 jobs will be treated more favorably than self-employed persons without W-2 jobs and it’s unlikely that the regulators would reach a conclusion that results in that disparate treatment. If you decide to take the approach that you describe below, you will risk making an excess contribution to the plan.”
    Can you please comment? Thanks!

    Reply
    • Go Curry Cracker

      Dunno – what was the exact question you asked your solo 401k provider?

      Maybe try our solo 401k contribution calc.

      One side comment – things don’t need to make sense or treat all people equally or favorably. They just need to follow the law.

      Reply
  5. Jon

    Can you explain why the deductible portion of self-employment tax is deducted, but then self-employment taxes are calculated based on this adjusted number. It seems rather circular.

    Reply
    • Go Curry Cracker

      This is IRS math so it doesn’t have to actually make any sense :)

      Self-employment taxes have 2 parts, the employee and the employer.
      The employer gets a deduction of business expenses, including payroll taxes. You (the employee) are paid out of the remainder.

      Reply

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