Self-Employment Tax

The self-employment tax is similar to the social security tax and Medicare tax for employees.

The self-employment tax is calculated on Schedule SE, Self-Employment Tax.

The self-employment tax is paid on self-employment profit. You need to pay self-employment tax if you had net earnings from self-employment of $400 or more.

• The self-employment tax rate for self-employment income earned in calendar year 2014 is 15.3% (12.4% for Social Security and 2.9% for Medicare).
• Taxpayers pay self-employment tax on 92.35 percent of their self-employment profit up to net earnings of $117,000.

The self-employment tax increases the total tax on Form 1040.

An adjustment to income of one-half of a taxpayer's self-employment tax decreases the income that is subject to income tax.

Paying Self-Employment Tax

Many taxpayers have income from self-employment. The "pay as you go" system also applies to self-employment income. If the SE tax due on this income exceeds certain limits, estimated tax payments must be paid.