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Not applicable
posted Jan 5, 2021 11:46:41 PM

If I earned less than $12,400 in 2020 and use the standard tax deduction, does my tax burden become $0? Would this still apply if my earnings all came from self-employment?

In other words if my total income was under 12.4k but I earned several thousand being self employment still, do I not have to pay any income tax taking a standard deduction? Or...do I only have to pay 15.3% self employment tax and get to skip the personal income burden?

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1 Best answer
Level 15
Jan 6, 2021 4:49:18 AM

you are correct - you would have to pay the 15.3% and there would be no federal income tax - not sure what your state requirement would be though.

3 Replies
Level 15
Jan 6, 2021 4:49:18 AM

you are correct - you would have to pay the 15.3% and there would be no federal income tax - not sure what your state requirement would be though.

Level 15
Jan 6, 2021 5:05:39 AM

The above answer assumes you are not and CAN not be claimed as a dependent by someone else.  A person who qualifies as a dependent doesn't automatically get the full $12,400 standard deduction. A dependent's standard deduction is $1100 or his earned income + $300, but not more than $12,400.

 

Unemployment compensation is not earned income for that calculation.  So, for example, if you had $11,000 of unemployment, you would have to pay federal income  tax on $9900 (11,000 - 1100 = 9900).

Not applicable
Jan 6, 2021 5:38:57 AM

Excellent. Love that. I had way more saved than I actually needed then. I can’t be claimed as a dependent.