self employment tax
- Thread starter gdubs12345
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Um, everyone pays "self employment" tax, whether you are self-employed or not. All it is really is the employee + employer portion of FICA ( Social Security+Medicare). If you had a W2 employment job you pay it as well. The difference is your employer "pays" half. However, effectively you are paying it all as everything that adds costs to your employer is basically a part of your compensation and substracts from what can end in your pocket.
It is also a regressive tax as the Social Security portion has an earnings cap. If you make a lot of money your effective % rate actually decreases.
The percentages thrown around here sound overblown. I do have 4 exemptions ( so the first $23,000 of my income has $0 income tax and the brackets move up a little slower), but even if you are single with 0 dependents, you make lLike your first $8500 income tax free and each rate moves up pretty slowly. No one pays 40% actual income tax and the most SE you pay is 15%.
For single taxpayers
If your taxable income is at least . . .
But not more than . . .
Your tax is:
$0
$7,825
10% of the amount over $0
$7,826
$31,850
$782.50 plus 15% of the amount over $7,825
$31,851
$77,100
$4,386.25 plus 25% of the amount over $31,850
$77,101
$160,850
$15,698.75 plus 28% of the amount over $77,100
$160,851
$349,700
$39,148.75 plus 33% of the amount over $160,850
$349,701
No limit
$101,469.25 plus 35% of the amount over $349,700
I calculate that ( including SE and Fed income tax) a single who makes $100,000 ( which is profit after all business expenses) would pay about 36% total. But you would pay this if you are employed as well. You just wouldnt have the luxury of seeing the employer match before you pay it in.
If you made $ 1 million for the year profit as a sole prop ( but why would you) your Income plus SE tax would be around 38% at the most.
If you pay more than that smehow, well i dont know how. But congratulations.
Dont get me wrong, I hate taxes. I think the Income tax should be 0%.
But the whole thing about SE and everything is overblown. If you have any clue, you are going to be paying less taxes than if you had a job. OR you are going to be employed by the company you happen to own.
It is also a regressive tax as the Social Security portion has an earnings cap. If you make a lot of money your effective % rate actually decreases.
The percentages thrown around here sound overblown. I do have 4 exemptions ( so the first $23,000 of my income has $0 income tax and the brackets move up a little slower), but even if you are single with 0 dependents, you make lLike your first $8500 income tax free and each rate moves up pretty slowly. No one pays 40% actual income tax and the most SE you pay is 15%.
For single taxpayers
If your taxable income is at least . . .
But not more than . . .
Your tax is:
$0
$7,825
10% of the amount over $0
$7,826
$31,850
$782.50 plus 15% of the amount over $7,825
$31,851
$77,100
$4,386.25 plus 25% of the amount over $31,850
$77,101
$160,850
$15,698.75 plus 28% of the amount over $77,100
$160,851
$349,700
$39,148.75 plus 33% of the amount over $160,850
$349,701
No limit
$101,469.25 plus 35% of the amount over $349,700
I calculate that ( including SE and Fed income tax) a single who makes $100,000 ( which is profit after all business expenses) would pay about 36% total. But you would pay this if you are employed as well. You just wouldnt have the luxury of seeing the employer match before you pay it in.
If you made $ 1 million for the year profit as a sole prop ( but why would you) your Income plus SE tax would be around 38% at the most.
If you pay more than that smehow, well i dont know how. But congratulations.
Dont get me wrong, I hate taxes. I think the Income tax should be 0%.
But the whole thing about SE and everything is overblown. If you have any clue, you are going to be paying less taxes than if you had a job. OR you are going to be employed by the company you happen to own.
Two Words: write-offs. Oh, and one more word: incorporate 
You can't get around self employment tax in the US, BUT you can write off everything but the kitchen sink (if it had a USB port, I'd write it off too).
My first year in business, I was so stingy with biz spending. Then I figured out that it makes no sense to skimp on your biz (ever). If I spend $800 on a cheap laptop, I'll get it back on my taxes, but if I spend $8,000 on an awesome laptop I'll get that back too. Why slum it when you can go first class?
The way I look at it, the governement is paying for everything I buy (for the biz), so I NEVER go cheap.
You can't get around self employment tax in the US, BUT you can write off everything but the kitchen sink (if it had a USB port, I'd write it off too).
My first year in business, I was so stingy with biz spending. Then I figured out that it makes no sense to skimp on your biz (ever). If I spend $800 on a cheap laptop, I'll get it back on my taxes, but if I spend $8,000 on an awesome laptop I'll get that back too. Why slum it when you can go first class?
The way I look at it, the governement is paying for everything I buy (for the biz), so I NEVER go cheap.
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