The self employment tax rate includes both Social Security and Medicare taxes. Anyone who makes $400 or more in self employment income must pay self employment taxes. For 2017, you will pay between 15.3 percent to 16.2 percent in self employment tax if you make $400 or more in self employment income; quarterly tax payments are required.
If you do your own taxes and are worried about your self employment income, QuickBooks Self-Employed (QBSE) can help you organize your finances. With QBSE, you can separate business and personal income and expenses, automatically calculate quarterly estimated taxes, and pay taxes online. Get started with up to 50 percent off QuickBooks.
Self Employment Tax Rate Table for 2016, 2017 & 2018
*Note: It is important for you to know that only 92.35 percent of your self employment income is subject to self employment taxes. This is because the IRS allows you to deduct half of your self employment tax (12.4% / 2 = 7.65%) when calculating your net earnings. If you take 100 percent and subtract 7.65 percent, you get 92.35 percent.
Who Has to Pay Self Employment Tax
If you had net earnings of $400 or more in self employment income, then you must pay self employment tax. Self employment tax is due four times a year, on the 15th of April, June, September, and January (of the following year). See our due dates table for additional details.
Entities that typically earn self employment income and are subject to self employment tax are:
- Sole proprietors
- Partners in a partnership
- Members of an LLC not taxed as an S-corp
- Independent contractors, such as Lyft/Uber drivers, who received a 1099-MISC form
If you are an S-corp, you will have to pay self employment taxes. However, if you own a corporation, you may or may not have to pay self employment tax. Check out our self-employment taxes for corporations section to learn more.
If already have an accounting software and you just need to get your self employment taxes filed, try TurboTax, our recommended tax software for small businesses. TurboTax will calculate your self employment taxes for you as well as complete Schedule SE and any other supplemental forms. Start your return for free and pay only when you file.
How to Calculate Self Employment Taxes
When you are a W2 employee, you are subject to 6.2 percent of Social Security taxes (up to $127,200 for the 2017 tax year) and 1.45 percent of Medicare taxes. This is a combined total of 7.65 percent. However, self-employed people (who don’t draw a salary) must pay double Social Security and Medicare taxes since they are required to pay both the employee and the employer portion of these FICA taxes.
Therefore, your “self employment taxes” consist of 12.4 percent in Social Security taxes (up to $127,200 for the 2017 tax year) and 2.9 percent in Medicare taxes (with no income limit). This is a combined 1099 tax rate of 15.3 percent. However, depending on your earnings and tax filing status, you may be subject to an additional Medicare tax of 0.9 percent; refer to our self employment tax rate table for more information.
Now that you know what the self employment tax rate is, you will need your business’ net profit or loss for the tax year in order to calculate how much self employment taxes you owe.
Listed below are three ways to access your total net profit or loss for the tax year:
- If you are a Sole Proprietor or single-member LLC, then complete your Schedule C first. The Net Profit (Loss) figure from Line 31 is your self employment income (loss). Check out our Schedule C guide for help with completing this form.
- If you are a Partnership or multi-member LLC that files Form 1065, then refer to your Schedule K-1 for the Net Profit (Loss) figure. This is your self employment income (loss). For help completing this form, check out our guide on Form 1065.
- If you are an Independent contractor, refer to your 1099-MISC form for the Net Profit (Loss) figure. This is your self employment income (loss). Check out our article on Form 1099 reporting for more information.
If you use an accounting program like QuickBooks, simply run your profit and loss report for the tax year (i.e., January 1 to December 31). The bottom line Net Profit (Loss) is your self employment income (loss). Once you have your self employment income, use the tax table below to determine your 1099 tax rate.
Self Employment Tax Rates for 2016, 2017 & 2018 Tax Years
| Social Security Tax Rate | Medicare Tax Rate | Combined Self Employment Tax Rate | |
|---|---|---|---|
| Under $400 | N/A | N/A | No self employment tax due |
| Single filers $400-$200K Married joint filers $400-$250K Married filing separate $400-$125K | 12.4% - on the first $118,500 of 1099 income (2016) 12.4% - on the first $127,200 of 1099 income (2017) 12.4% - on the first $128,400 of 1099 income (2018) | 2.9% | Combined 1099 tax rate of 15.3% Pay 1099 taxes on 92.35% of your income |
| Single filers Above $200K Married joint filers Above $250K Married filing separate Above $125K | 12.4% - on the first $118,500 of 1099 income (2016) 12.4% - on the first $127,200 of 1099 income (2017) 12.4% - on the first $128,400 of 1099 income (2018) | 3.8% | Combined 1099 tax rate of 16.2% Pay 1099 taxes on 92.35% of your income |
To summarize the above table, if you are a single filer, or you file married filing separate, your Social Security rate is 12.4 percent. A single filer who made less than $200,000 and someone filing married filing separate who made less than $125,000 will pay 2.9 percent of Medicare tax; this is a combined 1099 tax rate of 15.3 percent.
If you are filing a joint tax return with your spouse, you will need to first combine their income with your own to determine your self employment tax rate. If your combined income is $400 or more, your Social Security rate is 12.4 percent. If your combined income exceeds $250,000, your Medicare tax rate is 3.8 percent; this is a combined 1099 tax rate of 16.3 percent.
Let’s look at a couple of examples of how you would calculate the amount of self employment taxes owed:
Example 1: Let’s say that you own a restaurant and the net earnings for 2017 were $100,000. To figure out your taxable self employment income, multiply this amount by 92.35 percent, which equals $92,350. Then, apply the 15.3 percent tax rate to this amount. This shows that you owe $14,130 in self employment taxes.
Example 2: Let’s say you own a booming plumbing business, and the net earnings for 2017 were $150,000. Multiplying this by 92.35 percent tells you the taxable self employment income, which is $138,525. Only $127,200, however, is subject to Social Security tax, so your Social Security tax is $127,200 * 12.4% = $15,773.
The Medicare portion of the tax applies to the full $138,525, so your Medicare taxes are equal to 138,525 * 3.8% = $5,264. When you add up the Social Security and Medicare taxes, you’ll see that you owe a grand total of $21,037 in self employment taxes.
To make calculating self-employment taxes simple, check out QuickBooks Self-Employed. QuickBooks will automatically estimate your quarterly taxes for you and export your information to TurboTax so you can pay your taxes online. Get started today with up to 50 percent off.
How to Report Self Employment Tax
Business owners must use Schedule SE to compute and report self employment taxes. There are two types of Schedule SE’s: a short version and a long version. As you may have guessed, the short form is simpler to complete than the long form.
Follow the diagram below to determine which self employment form you must complete:
If you were subject to the 16.2 percent self employment rate, then you must also file Form 8959 to report the additional Medicare tax paid. This form, along with Schedule SE, must be filed with Form 1040.
When to Pay Self Employment Taxes
In order to determine the amount owed in self employment taxes, you could manually calculate it by using Schedule SE short form or long form, as discussed above. However, because it is manual, it could result in miscalculations. Therefore, we recommend you use an accounting software like QuickBooks Self-Employed (QBSE).
QBSE not only allows you to track all of your income and expenses, it will calculate your estimated quarterly taxes for you! You can also remit the payments electronically within the software. If you were taken by surprise with a sizable tax bill this year, you need to make quarterly payments throughout the year.
Keep in mind that if you underpay your taxes by more than $1,000, the IRS may charge a penalty when you file your tax return. The amount of the penalty depends on a number of factors, such as whether or not you were late with more than one payment as well as the number of days the payment was made after it was due. There are two methods for calculating the penalty, and the IRS Publication 505 provides step-by-step instructions on how to calculate the penalty for both methods.
In the table below are the estimated due dates for each pay period. As long as your payment is postmarked by the payment due date, it will be considered on time by the IRS.
Due Dates for Estimated Self Employment Tax Payments for 2016 to 2018
Apr 1-Jun 30 Jul 1-Sept 30 Sept 1-Dec 31 | 15-Jul 17-Oct 17-Jan 2017 | |
Apr 1-Jun 30 Jul 1-Sept 30 Sept 1-Dec 31 | 17-Jul 16-Oct 16-Jan 2018 | |
Apr 1-Jun 30 Jul 1-Sept 30 Sept 1-Dec 31 | 16-Jul 15-Oct 15-Jan 2019 |
*Due dates are generally on the 15th of the month following the pay period. However, if the due date falls on a Saturday, Sunday or a holiday, then payment is due on the next business day.
The IRS offers a variety of ways to make tax payments. I recommend using the Electronic Federal Tax Payment System (EFTPS). This is a free tool offered by the Department of Treasury, and you can use it to schedule payments in advance so that you don’t forget.
According to the EFTPS website, it can take up to seven business days to receive your PIN, which is required for you to log in and make payments. Make sure you apply well in advance of any deadlines; you can also check out other payment options that are available.
Two Ways to Reduce Your 1099 Tax Rate
Two ways you can reduce your self employment tax are to take more business deductions and change your business structure to an S-corp or an LLC taxed as an S-corp. Let’s take a look at each one in a little more depth.
Below we have listed how taking more business deductions and changing your business structure can reduce your self employment taxes:
1. Business Deductions
If you take advantage of all of the deductions available to you, then you can reduce your taxable income, which will therefore reduce your income tax liability and self employment tax liability. Costs incurred to get your business up and running, like website development and inventory purchases, are just a couple examples of deductible business expenses.
Below is a list of the most common business deductions that you can take:
- Home office expenses – deduct a percentage of rent, utilities as well as office furniture.
- Travel and entertainment expenses – deduct meals, transportation and hotel costs.
- Vehicle mileage deduction – deduct miles driven for business.
- Startup costs for brand new businesses – includes permits/licenses, insurance, inventory
- Signage – as a realtor, you can deduct the cost of signs created for open houses and other events. Check out our Top 25 realtor tax deductions guide for more tax deductions.
Be sure to keep good records just in case you ever have to prove to the IRS these were legitimate business expenses. To learn more about tax savings that you may be missing out on, read our Business Tax Saving Tips article.
2. Business Structure
If you decide to change your business structure to an S-corp or an LLC taxed as an S-corp, it could eliminate the amount of self employment tax that you pay because corporations have more allowable deductions, and you could pay yourself a salary so that you only pay half of your Social Security and Medicare tax and the corporation pays the other half.
I asked Shauna Wekherlien, known as the “Tax Goddess”: At what point should a sole proprietor consider becoming an LLC or S-Corp? Is it a certain amount of revenue, number of employees or other factors that would trigger a change? Here is her response:
This is a BIG question with a million answers! In the tax code, the answer is always “it depends!” From a strictly tax perspective, I recommend moving to an S-corp from a sole proprietorship when your NET profit is over $50,000/year regularly. That way the additional costs and headaches of having an S-corp, plus its tax savings, outweigh the simplistic and easier sole proprietorship. – Shauna Wekherlien, CPA, CTC, CTS, MTax
This is a BIG question with a million answers! In the tax code, the answer is always “it depends!” From a strictly tax perspective, I recommend moving to an S-corp from a sole proprietorship when your NET profit is over $50,000/year regularly. That way the additional costs and headaches of having an S-corp, plus its tax savings, outweigh the simplistic and easier sole proprietorship. – Shauna Wekherlien, CPA, CTC, CTS, MTaxKeep in mind that there are several requirements that must be met to qualify as an S-corp. Be sure to consult with a tax professional to determine if changing your business structure makes sense for your business.
Self Employment Taxes for Corporations
There are two types of corporations: S-corporation (S-corp) and C-corporation (C-corp). Both types of corporations protect shareholders from being sued so that they are not at risk of losing their personal assets if a lawsuit is filed against the business.
For tax purposes, an S-corp is not taxed, so all business income and expenses are passed down to the shareholders and reported on Schedule K-1. Therefore, the owner of an S-corp would have to include any income reported on Schedule K-1 as Net Self Employment income on Schedule SE to calculate self employment tax. To learn more about what taxes an S-corp is subject to, check out our S-corp tax guide.
A C-corp is considered a separate legal entity for tax purposes. If you’re the owner of a C-corp, you can be taxed twice, once as a corporate entity and then again on any distributions paid to you in the form of dividends. You are required to pay income tax on any distributions that you receive from the business. However, this income is not subject to self employment tax.
As the owner of a C-corp, you are subject to self employment tax if you receive compensation that is not reduced by Social Security and Medicare taxes. In this case, the corporation would issue a 1099-MISC form to you, and you would have to report that income as self employment income on Schedule SE. In general, most owners of a C-corp receive a salary like regular employees, so they don’t pay self employment taxes.
State & Local Tax Obligations
In this article, we have primarily focused on your tax responsibility at the federal level. Federal law controls self employment taxes because Social Security and Medicare are mandated at the federal level. However, states and localities may have additional or different income tax laws. To learn more about your tax responsibility at the state level, check your state tax agency website.
Self-Employed Tax Brackets
As discussed, self-employed businesses must report any income of $400 or more. The taxes due will be based on your personal income tax bracket. Below we have provided you with the 2018 Federal Income tax tables for Single Filers, Married Filing Jointly/Qualifying Widow(er), Head of Household and Separate (simply click Read More to display all tables). These rates will be used to file your 2019 tax return.
Frequently Asked Questions (FAQ) About Self Employment Tax
Listed below are the most frequently asked questions small businesses have about self employment. If you don’t see your question on the list, post your question in the Fit Small Business Forum and we will be happy to answer it!
What Is the Sole Proprietor Tax Rate?
There is no such thing as a sole proprietor tax rate. The tax rate that is used to calculate taxes due for a sole proprietor are the personal income tax rates, included in the table (above).
What Are Social Security and Medicare Tax Rates?
Social Security and Medicare taxes combined are called “self employment tax.” For wage earners, this tax is shared 50/50 with an employer. However, if you are self-employed, you are responsible for contributing both portions.
For the 2017 and 2018 tax year, the combined tax rate for Social Security and Medicare is 7.65 percent (Social Security is 6.2 percent and Medicare is 1.45 percent) for an employee and double (15.3 percent) for the self-employed. However, the maximum taxable earnings for Social Security is $127,200 ($128,400 for 2018 tax year). This means that once you reach $127,200 in taxable earnings for the year, you no longer have to pay Social Security taxes for the remainder of the year.
What Is the Difference Between Self Employment Taxes and Income Taxes?
A self-employed person pays income tax based on the business earnings and the personal income tax tables provided by the IRS. Self employment taxes cover Social Security and Medicare contributions that are not withheld from a paycheck throughout the year (like they are for a wage earner).
What Tax Deductions Can Self-Employed People Take?
Self-employed people are in business for themselves, which makes them eligible to take the same deductions as most small business owners. We have discussed a few of these deductions, but here are a few more:
- Meals and Entertainment
- Up to $500,000 ($1 million for 2018) in Equipment/Furniture purchases (Section 179 deduction)
- Tax return preparation fee
Where Can I Find Instructions on How to Complete Schedule SE?
Be sure to check out the step-by-step instructions on how to complete Schedule SE.
Bottom Line
Unfortunately, as long as you are in business for yourself, there is no way around paying self employment tax. The good news is that you can reduce those taxes by taking all of the tax deductions you are allowed and selecting the right business structure, as we discussed.
Take some of the stress out of filing your taxes by using QuickBooks Self-Employed. QuickBooks will track your income, expenses, and automatically calculate your taxes for you. Sign up for QuickBooks Self-Employed and get 50 percent off.
Tarva Ganois
Hello. I have a full time job and work as a newspaper carrier to supplement my income. The newspaper gives me a 1099 each year, what is the best way for me to lower my self-employment taxes? Thank you
Crystalynn Shelton
Hi Tarva,
Unfortunately you won’t be able to lower your self-employment taxes. Self-employment tax is a combination of social security and medicare taxes which are the same for everyone. However, if you have expenses that you pay for either your full-time job or your part-time newspaper gig that you don’t get reimbursed for those could help to lower your overall income tax bill. I recommend that you speak with a tax pro who can review your specific info and give you the best guidance. Check out our National Bookkeeper directory to see if you can find a local expert in your area.
Best of luck,
Crystalynn Shelton, CPA
Brittany
I run a tutoring business. I just started it. I will be making approximately 20k a year. I have some questions.
1. Will I have to file as a small business or as self employed? Which will get me the better tax rate?
2. If filing it said taxes were like 15% …so I would have to pay another 12% on top of that?
3. If your business is your only income and you file as single and you make 20k…will you get most of this back in a tax.return?
4. Do I have to file quarterly or can I do it at the end of the year?
Crystalynn Shelton
Hey Brittany!
Congratulations on your tutoring business! Below I have reposted your questions along with my response based on information that I am aware of. However, you should consider speaking with a tax expert who can look at your particular tax situation and provide specific guidance to you.
Question: Will I have to file as a small business or as self employed? Which will get me the better tax rate?
Answer: You can file as self-employed or you can choose to file as a sole proprietor. Filing as a sole proprietor will allow you to take deductions for any business expenses you incur so I recommend that you go that route. To learn more about the deductions you can take as a sole prop, check out our article on How to Complete Schedule C, I have provided the link below:
https://fitsmallbusiness.com/schedule-c-profit-and-loss-form-1040/
Question: If filing it said taxes were like 15% …so I would have to pay another 12% on top of that?
Answer: Self-employment tax can be anywhere between 15.3%-16.2%. Remember that it is only on 92.35% of your income, not the whole thing.
Question: If your business is your only income and you file as single and you make 20k…will you get most of this back in a tax.return?
Answer: Your tax liability is based on a number of factors, including the deductions you are eligible for, your exemptions as well as any eligible business expenses you take as a tax deduction. You would have to use a tax software like TurboTax to see what your tax liability would be.
Question: Do I have to file quarterly or can I do it at the end of the year?
Answer: Yes, you must file self-employment tax on a quarterly basis. If you don’t, a penalty will be assessed on your tax return if you do not file & pay quarterly.
Best-
Crystalynn Shelton, CPA
@CrystalynnPens
Crystal
Hello Crystalynn,
Why is only 93.25% of the income taxable verse 100%? Also is the 93.25% still applicable for tax estimates for 2018 and is this only at the federal level or is it state and local as well?
Thank you
Crystalynn Shelton
Hi Crystal, great questions! In all honesty I have no idea why we only pay taxes on 92.35% instead of 100%. However, maybe one of our other readers that is a tax expert can chime in here. As far as your question regarding whether or not this rate is applicable for estimated taxes, the answer is yes. On line 4 of Form SE it says to multiply by the 92.35% rate. This is a federal form so it is not applicable to states. However, the rules do vary by state so I recommend that you find out what the rules are for your state.
Best of luck,
Crystalynn Shelton, CPA
George
My son made less than $4000. For a summer internship while in college, The income was reported on a 199-misc. Does he have to pay self-employment tax?
Laura Handrick
Hi George,
Since you son is a college intern, not a business, and his annual income is only $4,000 he will need to report the income on a 1040 (not a 1040EZ). No need for him to file a business tax return.
Here is a link to the tax tables with instructions: https://www.irs.gov/pub/irs-pdf/i1040tt.pdf
Here is a link to the 1040 form: https://www.irs.gov/pub/irs-pdf/i1040gi.pdf
As we cannot provide specific tax advice, we recommend he use a tax preparer, or file taxes online using a free service like TurboTax.
Best wishes!
Laura, HR Writer
JK
hello Ms. Shelton,
My name is JK. I am helping my friend. His revenue for 2017 is 70K and loss is $5K. how much Social Security and Medicare he should pay? will it be 15.3%
Thanks so much
Crystalynn Shelton
Hi JK, unfortunately I cannot give any kind of tax advice. I recommend that you locate a tax pro or purchase a tax software like TurboTax that will do all of the calculations for you.
All the Best-
Crystalynn Shelton
Kathy Watson
I make less than 50,000 a year as a self employed contractor and when I figure the taxes the IRS is charging me I am paying almost double what your formula tells me I owe… after I deduct expenses. Are there factors that change your tax rate from 12.4%.
Crystalynn Shelton
Hi Kathy,
Self employment taxes consist of just social security and medicare taxes. Social security is 6.2% and medicare tax is 1.45%. If you double both of these rates for a 1099 contractor, you get a total of 15.3%. On top of this tax you still have to pay federal income taxes. I think this is where the discrepancy may be between your calculations and what the IRS has come up with. As you know, federal tax rates vary based on income, exemptions and other tax deductions that you may qualify for.
Thanks,
Crystalynn Shelton