5 SE tax

Question 1

Steps to calculate SE tax

Answer 1

1. take net earnings from SE (should be called “net profit” on Sched C
2. multiply by 92.35%
3. multiply by 15.3% up to SS wage base of $168K™, and then 2.9% for the rest, and maybe add’l medicare tax of 0.9%™

Question 2

Max retirement plan contrib for self-employed

Answer 2

1. subtract 1/2 of SE tax from net SE income
2. adjust contrib rate for the SE person (25% for everyone ÷ 125% = 20% for SE person)
3. multiple together