If all of your income is from self-employment, the reason it is so high may be the self-employment tax.
Your net profit from your self-employment is subject to 15.3% self-employment tax. That is separate from your regular tax. It is the replacement for Social Security and Medicare tax.
I calculated the SE tax on $22,700 and it came to $3,207. You will find the amount of your SE tax on line 4, of Schedule 2.
Self-employed workers have several options to reduce their tax burden.
Qualified Business Income (QBI) deduction. This is a 20% deduction of your net profit from business activities. It appears on line 10 of Form 1040.
Self-employed health insurance deduction. If you pay for health insurance, you can get up to 100% deduction for the amount you pay.
Half of SE tax paid is deducted, so you are not paying tax on your tax. This is done automatically by TurboTax.
You have more options for retirement savings.
Click here to learn more about what you can deduct.
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