Self employment tax

[trberkovich]

In previous answers, I understand that the self-employment tax  is 14.1%.  Is the 14,1% applied to gross income (line 1), adjusted gross income (line 11a), or taxable income (line 15).  If the taxable income is negligible, does that mean that no self-employment tax is due?

[Bsch4477]

You pay 15.3% of 92.35% of your net self employment income. 

[VolvoGirl]

You will pay Self Employment tax (Scheduled SE) on a Net Profit of $400 or more on Schedule C in addition to regular income tax on it.   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.  So you get social security credit for it when you retire.  

You are paying 15.3% for……

SS for employer 6.2%

SS for employee 6.2%

Medicare for employer 1.45%

Medicare for employee 1.45%

[rjs]

Self-employment tax does not apply to any of the income amounts on Form 1040. It applies to your net self-employment income. In most cases net self-employment income is the net profit on Schedule C line 31, which also appears on Schedule 1 line 3.

If your net self-employment income is $432 or less (not $400) there will be no self-employment tax. Otherwise the self-employment tax is calculated on Schedule SE. The calculation can get rather complicated. You might have to pay self-employment tax even if your taxable income is so low that you do not have to pay any income tax.

[VolvoGirl]

A little more info for you.   

The net effective rate is 14.1%.   And even though the IRS instructions for Schedule SE say…..”You must pay SE tax if you had net earnings of $400 or more” the tax doesn’t start until $433 Net Profit.

https://www.irs.gov/pub/irs-pdf/i1040sse.pdf

And the SE tax includes what you already paid in from your W2s box 4 so your schedule SE tax will only be the difference up to the max amount of $10,918.20 for social security.