Self-Employment Tax Calculation: The Basics

mathematics-254171_1280Here’s a basic overview of the self-employment tax calculation for self-employed people.

These are the steps for the calculation:

  1. Determine your net self-employment income. For most self-employed people, this will be the net profit from their Schedule C.
  2. Multiply by 92.35% (.9235).
  3. Multiply that result by 15.3%. This gives you the amount of self-employment tax you owe.

Why 92.35%?

This is the first question I’ve always had regarding self-employment tax. Since this post is intended to be a basic overview, I won’t get down in the weeds and answer that question right now. Look for another post, just on this topic, in the weeks to come.

Example of SE Tax Calculation

Joe the Window Washer has net self-employment income of $40,000.

  1. Multiply $40,000 by 92.35% = $36,940
  2. Multiply $36,940 by 15.3% = $5,652

Joe’s self-employment tax is $5,652

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