Self-employment tax explained
Understand the 15.3% self-employment tax, the 92.35% net earnings adjustment, and the half-SE-tax deduction.
Social Security portion
The Social Security part of self-employment tax is 12.4% up to the annual wage base. W-2 Social Security wages use that wage base first, so a high-paying job can reduce the SE income still subject to the Social Security portion.
This is why the calculator asks for W-2 income separately instead of treating every dollar as the same kind of ordinary income.
Medicare portion
The Medicare portion is 2.9% and does not have the same wage-base cap. Higher earners may also owe the 0.9% Additional Medicare Tax after the filing-status threshold.
The estimate separates regular SE tax from federal income tax so users can see why 1099 income often needs a larger set-aside than W-2 side income.
Why half of SE tax is deductible
The IRS allows an above-the-line deduction for one-half of regular self-employment tax. That deduction reduces adjusted gross income, but it does not erase the self-employment tax itself.
The result panel shows taxable income after the half-SE-tax deduction so the income-tax portion can be checked independently.
The guide explains the rule. The calculator shows how it changes your next quarterly payment.
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