Why is Self-employment tax listed under Deductions in TurboTax?
I'm going through my taxes in TurboTax and I'm kinda confused about something. So I can see my Standard Deduction showing up under the Deductions section, which makes total sense. I also see my Student loan interest paid there too, which I understand is deductible. But what's throwing me off is that TurboTax is also listing Self-employment tax as a deduction in the same section. This doesn't make sense to me at all. How is that a deduction? I thought self-employment tax was something I had to pay, not something that reduces my taxes. Isn't self-employment tax an expense rather than a deduction? And I'm also wondering how TurboTax is calculating this number in the first place. The amount seems weird to me but I'm not sure if it's right or wrong. Can someone explain this to me? I'm doing my taxes myself for the first time since starting freelance work and I'm totally lost on this part.
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Alice Pierce
This is actually a great tax quirk that benefits self-employed people! When you're traditionally employed, your employer pays half of your Social Security and Medicare taxes (7.65%) and you pay the other half through payroll deductions. But when you're self-employed, you're responsible for both halves (15.3% total) - that's your self-employment tax. Here's the good part: The IRS allows you to deduct half of your self-employment tax from your income. This isn't deducting the tax itself (you still pay it), but rather it's recognizing that the employer portion would normally not be taxable to you as an employee. The calculation is usually 15.3% of 92.35% of your net self-employment income (some income is exempt from SE tax). Then half of that amount becomes deductible on your Form 1040. TurboTax is doing this calculation automatically for you. Hope that helps clear things up!
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Esteban Tate
•Wait, so I'm paying the full SE tax but then getting to deduct half of it? Does this mean I'm not actually paying twice as much as regular employees? And does this deduction apply to both federal and state taxes?
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Alice Pierce
•You're still paying the full SE tax amount, but you get to deduct half of what you paid from your income before calculating your income tax. So you do pay the full 15.3% for Social Security and Medicare (compared to 7.65% for traditional employees), but this deduction helps offset some of that extra burden. This deduction only applies to your federal taxes, not state taxes, though some states may have similar provisions. It's an "above-the-line" deduction, meaning you can take it even if you don't itemize deductions.
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Ivanna St. Pierre
I had the exact same confusion when I started freelancing last year! After hours of researching and still being confused, I discovered taxr.ai (https://taxr.ai) which saved me a ton of headache with my self-employment taxes. I uploaded my documents and it explained everything clearly - including why half of the self-employment tax shows up as a deduction. Their system spotted that I'd been overpaying my estimated taxes because I wasn't accounting for this deduction correctly. It also explained how TurboTax calculates the self-employment tax amount (which is based on your net business income, not gross). Really helped me understand what I was looking at instead of just blindly trusting TurboTax.
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Elin Robinson
•Does it work with other tax software besides TurboTax? I'm using FreeTaxUSA and seeing similar stuff but don't know if their calculations are right.
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Atticus Domingo
•Sounds interesting but I'm skeptical. Does it actually do anything TurboTax doesn't already do? Like will it find more deductions or is it just explaining things?
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Ivanna St. Pierre
•It works with any tax software because it's analyzing your actual tax situation and documents, not just interpreting what TurboTax is doing. I've heard from others who use FreeTaxUSA that it's been helpful for them too. The explanations are tailored to your specific documents. It does more than just explain - it actually checks for errors and missed deductions across your whole return. For me, it found business expenses I could deduct that I hadn't considered and explained why certain deductions were or weren't available to me based on my specific situation.
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Atticus Domingo
Coming back to share an update - I tried taxr.ai after posting my skeptical comment and I'm seriously impressed. It caught that I had been calculating my home office deduction all wrong! And it explained why half the self-employment tax appears as a deduction in a way that finally made sense to me. I totally get it now - I'm paying the full 15.3% SE tax, but I get to deduct half of that from my income before calculating my income tax. The system even identified a few business expenses I didn't realize were deductible. Definitely worth checking out if you're self-employed and confused by all this tax stuff like I was.
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Beth Ford
If you're really confused about your self-employment taxes or have questions for the IRS directly, I'd recommend using Claimyr (https://claimyr.com). I was banging my head against the wall trying to get through to the IRS about my self-employment deductions after getting contradictory advice online. Was on hold for HOURS with no luck. Claimyr got me through to an actual IRS agent in about 15 minutes who explained exactly how the self-employment tax deduction works and confirmed I was doing it correctly. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent even walked me through some other deductions I could take as a self-employed person that I didn't know about. So much better than trying to figure it out from random internet advice.
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Morita Montoya
•How does this actually work? Like do they call the IRS for you or something? I don't get it.
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Kingston Bellamy
•Yeah right. Nobody gets through to the IRS in 15 minutes. I've been trying for weeks. Sounds like a scam to me.
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Beth Ford
•They don't call for you - it's a service that navigates the IRS phone tree and waits on hold for you. Once they get someone, they call you and connect you directly to the IRS agent. You do the actual talking yourself with the real IRS. It's definitely not a scam. I was skeptical too, but the reality is they use technology to efficiently navigate the system and wait on hold instead of you doing it. The longest part of calling the IRS is the hold time, and this service just handles that part. You still talk directly to actual IRS employees to get your questions answered.
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Kingston Bellamy
I'll eat my words. I tried Claimyr after posting my skeptical comment and got through to someone at the IRS in about 20 minutes. The agent confirmed everything about the self-employment tax deduction that others were saying here - it's legit that you get to deduct half of your self-employment tax as an adjustment to income. The IRS agent also clarified that this deduction is automatically calculated in most tax software (including TurboTax) and appears on Schedule 1 of Form 1040. Made me feel a lot better about what I was seeing in my return. They also answered some other questions I had about quarterly estimated payments that I could never find clear answers to online.
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Joy Olmedo
I'm a freelancer too and TurboTax confused me at first, but I figured it out! The self-employment tax deduction is explained in IRS Publication 535. The way I understand it: 1. You calculate your SE tax (Schedule SE) - usually 15.3% of your net self-employment income 2. You get to deduct HALF of that amount on Schedule 1 of your 1040 3. This reduces your adjusted gross income (AGI) 4. Lower AGI = lower income tax (but you still pay all of the SE tax) TurboTax does this all automatically behind the scenes. You're not deducting the tax itself - you're getting a deduction BECAUSE you paid the tax.
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Isaiah Cross
•This is super helpful but I'm still confused about one thing - does this deduction lower the amount of self-employment tax I pay or just my regular income tax?
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Joy Olmedo
•It only lowers your regular income tax, not your self-employment tax. You still pay the full self-employment tax amount (the 15.3% on your net earnings). The deduction just means your income tax is calculated after subtracting half of what you paid in self-employment tax. It's the IRS's way of giving you a break on your income taxes to partially offset the higher self-employment taxes you pay as your own employer.
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Kiara Greene
I messed this up last year and had to file an amended return! TurboTax showed the self-employment tax deduction but I thought it was an error and removed it. Ended up paying more taxes than I needed to. For anyone who's confused like I was: this is legitimate and automatic in tax software. Just leave it alone and let it calculate correctly. My mistake cost me a few hundred dollars plus the hassle of filing an amended return.
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Amy Fleming
•Wow thank you all for these answers! So if I understand right, I'm seeing the "self-employment tax" listed as a deduction because I get to deduct half of what I'm paying in SE tax from my income before calculating income tax? That does make sense now! I'm definitely still paying the full SE tax amount, but at least I get a little break on income tax. I thought TurboTax was glitching or something. This helps me feel more confident that everything is calculating correctly.
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