What are the income taxes for self-employed individuals?

What are the income taxes for the self-employed?

As a self-employed individual, you are responsible for paying self-employment tax (SE tax) in addition to your income tax. SE tax is a social security and Medicare tax that applies to the net earnings you receive from your self-employment activity.

Self-employment tax is calculated on your net earnings from self-employment, which is generally your gross income from your self-employment activity minus your deductible business expenses. You will report your net earnings on Schedule C (Form 1040), “Profit or Loss from Business,” and pay SE tax on this amount.

The current SE tax rate is 15.3%, which consists of two parts: 12.4% for social security (Old-Age, Survivors, and Disability Insurance) and 2.9% for Medicare (Hospital Insurance). You are responsible for paying the full SE tax rate on your net earnings, regardless of whether you participate in another retirement plan or receive other forms of income.

In addition to SE tax, you may also be required to pay federal income tax on your net earnings from self-employment. The tax rate for federal income tax depends on your taxable income and filing status. You will report your net earnings from self-employment on your tax return and pay any applicable federal income tax.

It’s a good idea to consult with a tax professional or refer to IRS Publication 533, “Self-Employment Tax,” for more information on SE tax and the tax obligations of self-employed individuals.

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