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According to the United States Internal Revenue Service (IRS), self-employment tax refers to Social Security and Medicare taxes and does not include any other taxes that self-employed individuals might be required to file.
Estimating how much you are going to pay for your taxes is one of the most difficult problems you need to tackle as a freelancer. With Lunafi's tools, you can estimate your liability for self-employment tax, tax rates, and tax savings. If you had to calculate self-employment tax (SE tax) yourself, you would need to use Schedule SE (Form 1040 or 1040-SR). But Lunafi takes the pain out of this process with our consultant tax calculator.
The self-employment tax rate is 15.3 percent, consisting of two parts: 12.4 percent for social security (old-age, survivors, and disability insurance) and 2.9 percent for Medicare (hospital insurance). For 2021, the first $142,800 of your combined wages, tips, and net earnings is subject to the Social Security part of self-employment tax. All your combined wages, tips, and net earnings in the current year are subject to the 2.9 percent of the Medicare part of the self-employment tax.
You can deduct the employer-equivalent portion of your SE tax when 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 self-employment tax.
Independent consultants often have multiple clients, periods of inconsistent earnings, and sporadic expenses related to their work. It is difficult to determine what your taxable income is and how much you will need to pay at the end of the financial year. Lunafi provides a wide range of tax tools that make it easier to manage your accounts and fulfill your tax obligations such as a consultant tax calculator, and the independent contractor tax brackets form.
Our tools are specially designed for freelancers and independent consultants, who find it difficult to find solutions that fit their unique needs. With these tools, you will never have to worry about keeping track of your income, expenses, and tax obligations again.