Hi SimonJ9, I want to ensure you are applying the 15.3% to the correct amount of income.
Part One: Self Employed Tax
Self-employment tax: 15.3%, apply to 92.35% of total income, which is $1412.96. No question.
This formula is applied to Net income. After you have deducted expenses paid for your business.
Part Two: Federal Income Tax
1. Deduct half of the SE tax ($706.48). No question. (Correct, as long as $1412.96 is the Self-employment tax owed)
2. Standard deduction: How doe it apply to quarterly tax? (It is for the whole year?)
Estimated payments are made to cover 2 different taxes; Income taxes and Self-employment taxes.
- You will not use the standard deduction when calculating Self-employed taxes (you have that calculation shown correctly above)
- You will use the standard deduction when calculating Income Taxes
- The standard deduction must be deducted before you can fully calculate estimated taxes.
Yes, the Standard deduction is deducted from total income for the year. If you have other income along with the self-employment income, add all income together when calculating final estimated payments.
For Example: Net $25,000 Self employment is your only income
You will have to pay estimated taxes on the Self employment tax. Then, you must also pay estimated payments on Income tax. Although calculated separately, the estimated payment is just one payment.
Calculating income tax is where the standard deduction comes in.
EX. Total income is $25000
1. Minus standard deduction which is $14,600 for single person in 2024.
Taxable income is now $11,400. 10% tax bracket results in $1140 Income taxes
You would make a total quarterly payment on
- Net income of $11,400 and
- Self employment tax self-employment income of $25000
3. QBI: Do I qualify for QBI if I'm an individual contractor? Yes, individual contractors qualify for QBI deduction.
4. If I work in my home office, does the house rental count as business expense? Yes, If you use a home office for regular and exclusively for your work you may qualify for the home office deduction.
Deductible expenses for business use of your home include the business portion of real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance, and repairs. In general, you may not deduct expenses for the parts of your home not used for business, for example, lawn care or painting a room not used for business.
or
You can use the simplified method of 5 per sqft.
https://www.irs.gov/newsroom/how-small-business-owners-can-deduct-their-home-office-from-their-taxes
5. federal tax: What bracket should I use for this since I cannot estimate the total income for the entire year yet? When preparing estimated taxes, you must estimate your income for the year. Once you have a total number for the entire year, you will know the your tax bracket after you deduct the standard deduction.
Ex. Total Income $25000
Minus $14,600 (standard deduction)
Taxable income is $11,400. 10% tax bracket.
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