If I can deduct 0.0765% of self-employment taxes as a business expense, and my gross income - business expense = SE taxes, would 13,597 become 12,630 in owed SE taxes?

Forum|Forum|3 years ago
January 10, 2023
2 replies
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Im trying to see what I will really owe in SE taxes.

TurboTax Online

VolvoGirl

Level 15

I didn't follow your math but not quite.

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment. You pay 15.3% SE tax on 92.35% of your Net Profit (If it is greater than $400). The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare (FICA). So you get social security credit for it when you retire.

The SE tax is already included in your tax due or reduced your refund. It is on the 1040 Schedule 2 line 4 which goes to 1040 line 23. The SE tax is in addition to your regular income tax on the net profit.

You do get to take off the 50% ER portion of the SE tax as an adjustment on 1040. It will be on Schedule 1 line 14 which goes to 1040 line 10a. And subtract the QBI Adjustment on 1040 line 13.

So if the Net Profit on Schedule C is 13597 you will owe $1,921.19 SE Tax.

Mike9241

Level 15

you would need $89387 in taxable SE income (for both FUCA and Medicare purposes) to generate $12630

in SE taxes 89238 X .9235 x .153.

oh and you get an income tax deduction for 1/22 of the SE taxes.

Mike9241

fanfare

Level 15

SE tax is not a business expense.

Nor is income tax.

Critter-3

Level 15

SE taxes are NOT deducted from the Sch C ... it is not a business deduction.

Instead 1/2 of the SE taxes are and ADJUSTMENT to the form 1040 so you don't pay FEDERAL taxes on the employer's 1/2 of the SE taxes ... I think that is what was confusing you.

Please review the form 1040, Sch C, Sch 2 line 4 and the Sch 1 line 15.