As a self-employed individual, calculating your taxes can be confusing and overwhelming. Understanding how to calculate self-employment tax is essential to avoid penalties and ensure you are paying the correct amount. In this article, we will break down the process and provide helpful tips for small business owners and entrepreneurs.

Self-employment tax is the Social Security and Medicare tax paid by individuals who work for themselves. Unlike traditional employees, self-employed individuals are responsible for paying both the employer and employee portions of these taxes, which currently amount to 15.3% of your net self-employment income.


To calculate your self-employment tax, you will need to determine your net self-employment income. This is your total income minus any allowable business expenses, such as office supplies, equipment, and travel expenses. Once you have your net income, you can calculate your self-employment tax using the following formula:

   Net Self-Employment Income x 0.9235 x 0.153

The first factor, 0.9235, represents the portion of your income subject to self-employment tax. This is because self-employed individuals are only required to pay taxes on 92.35% of their net income, as opposed to the full 100% for traditional employees. The second factor, 0.153, represents the current self-employment tax rate of 15.3%. Multiply your net self-employment income by these two factors to calculate your self-employment tax.

For example, if your net self-employment income for the year is $50,000, your self-employment tax would be calculated as follows:

   $50,000 x 0.9235 x 0.153 = $7,065.23


In addition to self-employment tax, you may also be required to pay federal income tax and state income tax, depending on where you live and do business. It is important to keep accurate records of your income and expenses throughout the year to ensure you are paying the correct amount of taxes. To make the process of calculating and paying taxes easier, consider using accounting software or hiring a tax professional. There are also numerous resources available for small business owners, including Small Business Development Centers (SBDCs) and the Small Business Administration (SBA), which offer assistance programs and technical assistance to help you grow your business and stay compliant with tax laws.

If you find calculating your self-employment tax overwhelming, don’t hesitate to seek help. The Association for Entrepreneurship offers resources and assistance programs to help small business owners navigate the complexities of tax regulations and requirements. By joining the Association, you’ll have access to technical assistance, small business programs, and other resources to help you grow your business and achieve financial success. Don’t let tax concerns hold you back from pursuing your entrepreneurial dreams. Take advantage of the resources available to you and start building your successful business today with the help of the Association for Entrepreneurship.


Article by
Christian Peterson
Marketing Manager

Christian Peterson