If one is obligated to pay self-employment tax because he/she has business income and hasn't reached the maximum wage for for social security contributions, I believe the SE percentage rate is 15.3 percent of the amount of business income. However, as I understand the SE tax regulations, one receives a credit for half of that amount as an adjustment to gross income. So if one is obligated to pay on $15,000 of business income, then the SE tax is $2250 with a credit of $1125. Therefore, the effective SE tax is $1125. Am I understanding this correctly?
- posted
15 years ago