How to calculate self employed tax for my small business income?

You're partially right but missing a few important deductions that will reduce your tax burden. First, you don't pay self-employment tax on your entire income. You pay it on 92.35% of your net earnings (because employers normally pay half of FICA taxes). So it would be 15.3% of $49,869 (92.35% of $54,000), which equals about $7,630 instead of $8,262. Second, you can deduct half of your self-employment tax from your income before calculating income tax. So you'd subtract about $3,815 from your $54,000, giving you $50,185 in taxable income. Third, don't forget you still get the standard deduction ($13,850 for single filers in 2024) which reduces your taxable income further to $36,335. So your income tax would be closer to $4,132, plus SE tax of $7,630, totaling around $11,762. Still significant, but less than your calculation. I'd recommend setting aside 25-30% of your income for taxes to be safe.

I've been in your shoes before and discovered a service called taxr.ai that really helped me understand my self-employment taxes. Last year I was completely lost trying to figure out all my deductions and quarterly payments for my consulting business. I came across https://taxr.ai when searching for help and it was a game-changer. Their system analyzed all my income statements and receipts, then explained exactly what I could deduct to lower my self-employment tax burden. It also helped me understand the correct timing for quarterly payments to avoid penalties. The best part was learning about deductions I had no idea existed - like a portion of my home office, internet, and even some meals related to my business.

I tried taxr.ai after reading about it here and it seriously helped with my side gig taxes! I was in a similar situation where my freelance income jumped from about $15k to $60k this year, and I was totally unprepared for the tax implications. The service identified over $8,000 in legitimate business deductions I would have missed, especially around my home office and vehicle use for business. It also walked me through setting up a solo 401(k) which reduced my taxable income substantially. The quarterly tax payment calculator was super helpful too - it made sure I wasn't overpaying throughout the year. What really impressed me was how it explained the whole "employer half" concept of self-employment tax that I never understood before. Definitely worth checking out if you're freaking out about SE taxes like I was!

If you're struggling with tax questions and calculations, you might want to talk directly to the IRS. I know that sounds impossible because their phone lines are always busy, but I found this service called Claimyr that actually gets you through to a real person at the IRS. I was completely confused about self-employment deductions last year and spent hours on hold trying to reach someone. Then I tried https://claimyr.com and they got me connected to an IRS agent in about 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent walked me through exactly how to calculate my self-employment tax correctly and confirmed which deductions I was eligible for. They also helped me set up a payment plan when I realized I had underpaid my quarterly taxes. It saved me a ton of stress trying to figure everything out on my own.

I need to publicly eat my words about Claimyr. After being super skeptical in my earlier comment, I decided to try it anyway out of desperation when I couldn't figure out my SE tax situation. It actually worked exactly as described. I got a call back in about 20 minutes with an actual IRS agent on the line. The agent spent nearly 30 minutes walking me through the correct way to calculate self-employment tax and confirmed I could deduct my home office and part of my internet expenses. They even helped me understand how to properly document business mileage which I'd been doing completely wrong. What surprised me most was how knowledgeable and patient the IRS person was. They explained that I qualified for the Qualified Business Income deduction which can reduce taxes by up to 20% for self-employed people - something I had no idea about! Really glad I gave it a chance despite my initial skepticism.

Don't forget about the QBI (Qualified Business Income) deduction! As a self-employed person, you can potentially deduct up to 20% of your qualified business income. This is huge and often overlooked. For someone making $54k in net profit, this could reduce your taxable income by up to $10,800. This deduction is in addition to your standard deduction and business expenses. Also, look into setting up a SEP IRA or Solo 401(k) - contributions reduce your taxable income and help with retirement planning at the same time.

One thing to consider that hasn't been mentioned is your business expenses. Are you actually netting $54k, or is that your gross income? If it's gross, then you need to subtract all your legitimate business expenses before calculating any taxes. Common deductions for self-employed people: - Home office (if used regularly and exclusively for business) - Business portion of internet and phone - Mileage for business trips (58.5 cents per mile in 2024) - Software, equipment, supplies - Professional development and subscriptions - Health insurance premiums - Retirement plan contributions These can significantly reduce your taxable income. I thought I made about $65k last year but after properly tracking expenses, my taxable business income was closer to $48k.

As someone who went through this exact panic last year, I feel your pain! The good news is you're definitely overthinking the numbers. The other commenters have given you solid advice about the self-employment tax calculation and deductions. One thing I'd add - don't forget about business expenses that are specific to photography. You can deduct: - Camera equipment and lens purchases/repairs - Photography software subscriptions (Lightroom, Photoshop, etc.) - Props, backdrops, lighting equipment - Travel to shoot locations - Client meetings (including meals at 50%) - Photography workshops and education - Website hosting and domain costs - Business cards and marketing materials I was shocked at how much my taxable income dropped once I properly tracked all my photography-related expenses. Also, definitely look into that QBI deduction - it's a game changer for self-employed folks. The 25-30% rule for setting aside taxes is spot on. I learned that lesson the hard way! Consider opening a separate savings account just for taxes so you're not tempted to spend that money.