Business Operations
Sole proprietors and single-member LLCs pay SE tax on top of income tax. Most operators underestimate their total liability by 15–20%.
Estimate only. Consult a tax professional for filing.
SE tax covers Social Security (12.4%) and Medicare (2.9%), totaling 15.3%. As an employee, your employer pays half. As a self-employed person, you pay both halves — on 92.35% of your net profit (the 7.65% reduction accounts for the "employer half").
SE Tax Base = Net Profit × 0.9235
SE Tax = SE Base × 0.153
Example: $120,000 profit → $110,820 base → $16,955 SE tax
SE Deduction (50% of SE tax)
You deduct half of your SE tax from gross income before calculating income tax. This mirrors the employer-side deduction employees receive.
$16,955 SE tax → $8,477 deduction from gross income
QBI Deduction (20% of qualified business income)
Most self-employed operators can deduct 20% of net business income, further reducing taxable income. Subject to income phase-outs above ~$191k.
$120,000 profit → $24,000 QBI deduction
Standard / Itemized Deduction
2024 standard deduction is $14,600 for single filers, $29,200 married filing jointly.
$14,600 further reduction in taxable income
These are marginal rates. Income in each bracket is taxed at that bracket's rate only.
Self-employed operators must pay estimated taxes quarterly or face underpayment penalties. Total annual tax divided by 4 gives your quarterly payment.
Rates include SE tax and federal income tax. State taxes not included.