J.K. Lasser's Your Income Tax 2022

CHAPTER 45Figuring Self-Employment Tax

Self-employment tax provides funds for Social Security and Medicare benefits. The self-employment tax is calculated on Schedule SE. You are required to prepare Schedule SE if you have self-employment net earnings of $400 or more in 2021, but you will not incur the tax unless your net self-employment earnings exceed $433.13. The tax is added to your income tax liability. When preparing your estimated tax liability, you must also include an estimate of self-employment tax; see Chapter 27.

On Schedule SE, self-employment income is reduced by a deduction reflected in the decimal of .9235 listed on the form. You also deduct one-half of the self-employment tax on Line 15 of Schedule 1 (Form 1040 or 1040-SR).

For 2021, the self-employment tax of 15.3% consists of the following two rates: 12.4% for Social Security and 2.9% for Medicare. After multiplying the net earnings by .9235, the combined 15.3% rate applies to a taxable earnings base of $142,800 or less; the 2.9% rate applies to all taxable earnings exceeding $142,800.

You are required to pay self-employment tax on self-employment income even after you retire and receive Social Security benefits.

If you opted in 2020 to defer the “employer portion” of Social Security taxes that are part of self-employment tax, you must pay 50% in 2021 (45.7).

• 45.1 What Is Self-Employment Income?
• 45.2 Partners Pay Self-Employment Tax
• 45.3 Schedule SE
• 45.4 How Wages Affect Self-Employyment Tax
• 45.5 Optional ...