Free 2018 Tax Planning2019-01-05T15:05:52+00:00

Free 2018 Tax Planning

Self employment tax

When you receive a paycheck, you notice that they are variety of taxes taken, 2 of which are social security and medicare tax. You pay half of it and your employer pays the other half. This is money you can draw on when you retire.

Self employment tax is the social security and medicare tax for someone who works for themself. This entrepreneur will often file  a schedule c, or partnership return if more than one person.

The self employment tax is added to the tax calculated for all income. Half of it is deducted from gross income. In other words, the entrepreneur gets to deduct the employer portion of the self employment tax.

The social security tax is 12.4% of your net income, while the medicare tax is 2.9%. This makes for a total tax of 15.3%.