Start A Business

Step 13: Self-Employment Tax

Self-employment tax is the Social Security and Medicare tax for individuals who work for themselves. Your payments of self-employment tax contribute to your coverage under the social security system. Social security coverage provides you with retirement benefits, disability benefits, and medical insurance (Medicare) benefits.

You must pay self-employment tax if:

1. Your net earnings from self-employment (not including church employee income) are $400 or more, or
2. You have church employee income of $108.28 or more.

Use Schedule SE (Form 1040) to figure your self-employment tax. Deduct one-half of your self-employment tax as an adjustment to income on your Form 1040.