Self-Employment Tax (Schedule SE)

By Entrepreneur Staff

Self-Employment Tax (Schedule SE) 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.

More From Taxes

Alternative Minimum Tax (AMT)

A separate tax system designed to keep high-earning corporations and individuals from reducing their taxes to a level that the federal government considers too low

Employer Identification Number (EIN)

A 9-digit number obtained by a business with paid employees from the IRS. If you're a sole proprietorship, your EIN is your social security number.

Medicare Taxes

The tax you withhold from your employees' paychecks to cover the cost of Medicare expenses

Tax Deductions (aka Standard Business Tax Ded

The costs of doing business that are tax-deductible to the full extent of the law