Definition: A social security and Medicare tax primarily for individuals who
work for themselves. It's similar to the social security and
Medicare taxes withheld from the pay of most wage earners.
If you're a sole proprietor, every year you must file Schedule C
(Profit or Loss From Business) with your Form 1040 (U.S. Individual
Income Tax Return) to report your business's net profit and loss.
You also must file Schedule SE (Self-Employment Tax) with your 1040
if your net earnings from self-employment were $400 or more. The
self-employment tax rate is 15.3%. The rate consists of two parts:
12.4% for social security (old-age, survivors, and disability
insurance) and 2.9% for Medicare (hospital insurance).
You can deduct half of your SE tax in figuring your adjusted
gross income. This deduction only affects your income tax. It does
not affect either your net earnings from self-employment or your SE
tax.
If you're a calendar-year taxpayer, your tax filing date is
April 15. Fiscal-year taxpayers must file their returns no later
than the 15th day of the fourth month after the end of their tax
year.