You must pay self-employment tax and file Schedule SE (Form 1040 or 1040-SR) if either of the following applies. See the Form 1040 or 1040-SR and Schedule SE instructions for calculating and claiming the deduction. This deduction is taken into account in calculating net earnings from self-employment. Under Section 2042 of the Small Business Jobs Act, a deduction, for income tax purposes, is allowed to self-employed individuals for the cost of health insurance. Self-Employment Health Insurance Tax Deduction Learn more about EITC or use the EITC Assistant to find out if you are eligible. If you file a Form 1040 or 1040-SR Schedule C, you may be eligible to claim the Earned Income Tax Credit (EITC). It does not affect either your net earnings from self-employment or your self-employment tax. This deduction only affects your income tax. You can deduct the employer-equivalent portion of your self-employment tax in figuring your adjusted gross income.
Qualifying surviving spouse with dependent childįor more information, refer to the Questions and Answers for the Additional Medicare Tax page. Head of household (with qualifying person) You are liable for an additional 0.9% Medicare Tax if your wages, compensation, or self-employment income (together with that of your spouse if filing a joint return) exceed the threshold amount for your filing status: Filing Status However, you must pay the 2.9% Medicare part of the SE tax on all your net earnings. If your wages and tips are subject to either social security tax or the Tier 1 part of railroad retirement tax, or both, and total at least $160,200, do not pay the 12.4% social security part of the SE tax on any of your net earnings. Even if the tax rate or maximum earnings limit changes during your tax year, continue to use the same rate and limit throughout your tax year.Īll your combined wages, tips, and net earnings in the current year are subject to any combination of the 2.9% Medicare part of Self-Employment tax, Social Security tax, or railroad retirement (tier 1) tax. If you use a tax year other than the calendar year, you must use the tax rate and maximum earnings limit in effect at the beginning of your tax year. (For SE tax rates for a prior year, refer to the Schedule SE for that year). The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).įor 2023, the first $160,200 of your combined wages, tips, and net earnings is subject to any combination of the Social Security part of self-employment tax, Social Security tax, or railroad retirement (tier 1) tax. Wage earners cannot deduct Social Security and Medicare taxes. Also, you can deduct the employer-equivalent portion of your SE tax in figuring your adjusted gross income. However, you figure self-employment tax (SE tax) yourself using Schedule SE (Form 1040 or 1040-SR). It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners.Įmployers calculate Social Security and Medicare taxes of most wage earners. Self-employment tax is a tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves. Other information may be appropriate for your specific type of business. The list of items below is not all-inclusive. In the article below, all references to self-employment tax refer to Social Security and Medicare taxes only and do not include any other taxes that self-employed individuals may be required to file.
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