Hi, we are showing 123k overall income this year all going under our self employment. After deductions our taxable income is 52k. Then Turbo Tax is showing a blended tax rate of 38.6! Which comes to 14k in taxes owed. Does this seem right? 38% is a way different tax bracket than our income or am I mistaken? Thank you, learning here!
Well you do owe Self Employment tax in addition to regular income tax on it.
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 on 52,000 net profit is $7,347.37
What version are you using? You need to use Online Premium to fill out self employment on schedule C. Print or review your return. What lines don't you understand?
Before filing you can preview the 1040 or print the whole return
https://ttlc.intuit.com/community/accessing/help/how-do-i-preview-my-turbotax-online-return-before-filing/00/26160
This blended tax rate is inclusive of the 15.3% self-employment tax on your net self-employment. Then that is added into the calculation with the income tax on your general taxable income (your net income from self-employment less your standard or itemized deductions.)
So, your blended tax rate is a bit higher than your marginal income tax rate when reporting self-employment income.
Well you do owe Self Employment tax in addition to regular income tax on it.
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 on 52,000 net profit is $7,347.37
What version are you using? You need to use Online Premium to fill out self employment on schedule C. Print or review your return. What lines don't you understand?
Before filing you can preview the 1040 or print the whole return
https://ttlc.intuit.com/community/accessing/help/how-do-i-preview-my-turbotax-online-return-before-filing/00/26160
Thank you for that explanation! Sounds like many are agreeing that the tax rate is not unreasonable. I just want to make sure we don’t overpay as every dollar counts lol. I use the online version that is $90 or so, not the plus version. I do not use the software. Are you saying if I file with TurboTax this year I should upgrade to the self employment version or Plus version? We are having a CPA friend look into our taxes today and then we will make a decision from there.
Thank you so much for taking the time to reply to me!!