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Need Some Deductions for 2011?
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Updated for 2011
Self-Employment Tax
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Deduction for Part of Self-Employment Tax
You deduct part of the self-employment tax on Form 1040, line 27.
UPDATE: For 2011, the employee's share of social security tax was reduced 2%, to 4.2% (.042). As of this writing, this reduction was also extended for two months in 2012.
Figuring Your Self-employment Tax Deduction
Because of the 2% reduction in the social security tax for employees, a self-employed person must perform a special computation to figure the self-employment tax deduction, which is entered on the first page of Form 1040.
- If self-employment tax is $14,204.40 or less, multiply the amount by 57.51% to figure your self-employment tax deduction, which is entered on page one of Form 1040.
- If self-employment tax is more than $14,204.40, multiply the tax by 50% and add $1,067 to the result to get your deduction.
The deduction is entered on Form 1040, Line 27 (2011). It's deductible even if you don't itemize your deductions.
Since you don't have to itemize your deductions to deduct self-employment tax it is referred to as an above-the-line deduction.
Deductions for Retirement Plans
In figuring your self-employment tax do not reduce net earnings by your deductible contributions to your own SEP or Keogh plan (Form 1040, Line 28) or your self-employed health insurance deduction (Form 1040, Line 29).
You'll notice on Schedule SE, line 4a, there is a decimal of .9235 listed. You multiply the net profit amount on Schedule C1 by this decimal to determine net earnings from self-employment.
Next:
Self-Employment Tax: Self-Employment Tax and Married Couples; Community Property States; Retirees and Self-Employment Tax
Related Links
- What is Self-Employment Tax?
- Self-Employment Tax Rate
- Earnings Limitation for Social Security Tax
- Income From a Job and Self-Employment
- Who Pays Self-Employment Tax?
- What Are Net Earnings from Self-Employment?
- Self-Employment Tax for Schedule C Filers
- What Are Net Earnings from Self-Employment?
- Computing Net Earnings From Self-Employment-Schedule C Filers
- When to Pay Self-employment Tax
- More Than One Business
- Net Operating Loss Deduction
- Personal Exemption and Self-Employment Tax
- Items Not Included in Self-Employment Income
- When to File Schedule SE
- Self-Employment Tax Rate
- Business Interruption Insurance Proceeds
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