Using the Social Security Deduction for Your Small Business

For those who are self-employed, their social security deduction may be a little more complicated. Below is a little information regarding social security for small businesses and the self-employed.

Social Security for Small Business and Self-Employment

Whether you are self-employed or you own a small business, it is important to understand how your taxes will work. When you have a small business or work for yourself, you have self-employment tax. This is basically made up of social security as well as medicare. It is a lot like the taxes that are paid by regular employees. This particular tax rate for the year 2010 was 15.3 percent adjusted down to 13.3 in 2011. These taxes can be calculated on your own with the help of Schedule SE on Form 1040. It is important to note that even tips are subject to self-employment tax and must be reported.

Deducting Self-Employment Tax

If you are self-employed and make more than $400, you must pay self-employment taxes. When you are figuring your adjusted gross income though, you are allowed to deduct up to half of your self-employment tax. This can only be done on your income taxes though and should be reported on Form 1040 Schedule C.

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