Do I calculate self employment tax before or after my standard & business deductions?

12 You calculate self employment tax on your net business income BEFORE your standard deduction. Here's how it works: You take your gross income ($63,000) and subtract your legitimate business expenses ($17,000) to get your net business income ($46,000). Then you calculate self employment tax on 92.35% of THAT amount. The math would be: $46,000 × 92.35% = $42,481, then $42,481 × 15.3% = $6,500 (rounded) for your self employment tax. The standard deduction comes into play later when calculating your income tax, not your self employment tax. They're separate calculations. The standard deduction reduces your income for income tax purposes but does not reduce your self employment tax.

8 I went through the exact same confusion last year when I started freelancing! I found this tool called taxr.ai (https://taxr.ai) that really helped me understand exactly how self-employment taxes work. You upload your documents and it walks you through the calculations step by step. For me, the big lightbulb moment was understanding that self-employment tax and income tax are calculated separately but paid together. The self-employment tax is calculated on your net business income (after business expenses but before standard deduction), while income tax is calculated after both business expenses AND the standard deduction.

19 Just wanted to follow up - I tried taxr.ai after posting my skeptical comment and I have to admit I'm impressed. It really did clarify the whole self-employment tax confusion for me. The visualization of how my business expenses reduced my SE tax base made everything click. It showed me exactly how much I was saving in self-employment tax for each business deduction, which none of the other tax software I've used ever explained clearly. Definitely using it again next year!

15 If you're still confused or want to double-check your calculations, you might want to call the IRS directly. I know it sounds like a nightmare (because it usually is), but I found this service called Claimyr (https://claimyr.com) that actually gets you through to a human at the IRS without the endless hold times. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was in a similar situation - totally confused about self-employment taxes and deductions - and was able to get through to an IRS agent who walked me through the whole process. They confirmed exactly what the first commenter said: SE tax is calculated on net business income (after business expenses, before standard deduction).

22 I need to eat my words about Claimyr. After posting my skeptical comment, I decided to try it because I was desperate to get an answer about some business deductions I wasn't sure about. I got a call back with an IRS agent in about 45 minutes! The agent confirmed everything about the self-employment tax calculation and also helped me understand which of my questionable expenses were actually deductible. Saved me a ton of money and stress. Definitely worth it during tax season when it's otherwise impossible to reach them.

5 A quick tip that helped me: Think of self-employment tax as your FICA taxes (Social Security and Medicare) that would normally be withheld by an employer. When you're self-employed, you're both the employer and employee, which is why it's 15.3% (double the normal employee rate). The standard deduction doesn't factor into FICA taxes for W-2 employees either, so it makes sense it doesn't affect self-employment tax calculations.

2 This might be a dumb question but do I need to make quarterly estimated payments on self-employment tax too or just on income tax?

Just to add another perspective - I've been self-employed for about 5 years now and this confusion about SE tax vs income tax trips up almost everyone in their first year. One thing that really helped me was setting up a separate savings account specifically for taxes and automatically transferring about 30% of every payment I receive. This covers both the self-employment tax (around 14% after the deduction for the employer portion) plus income tax. It's better to overestimate and get a refund than to be short come tax time. Also, don't forget that you can deduct half of your self-employment tax when calculating your income tax - it's like getting back the "employer portion" since you're paying both sides as a self-employed person. The tax software handles this automatically but it's good to understand why your taxable income gets reduced.