Self-Employment Tax

Those who are self-employed — sole proprietors, partners and members of limited liability companies that have elected to be treated as partnerships — are subject to self-employment tax. The tax is in 2 parts — one for retirement and one for Medicare — with slightly different rules. For those who are employees of others, as well as being self-employed (a large part of the self-employed population) a credit is allowed, in effect, for the retirement portion of FICA (the social security tax on employees and employers). The worksheet below will figure your self-employment tax on expected self-employment earnings and the income tax deduction for half that tax.