(360) 298-5755
FlaneryCPA.com
FlaneryCPA.com
logo
  • Home
  • The Team
  • Blog archive
Self-employment taxes
September 19, 2016 by Marci Flanery 0 Comments 962 Views
Home Self-employment taxes Self-employment, Marriage and Taxes
Prev
0
Self-employed vs Employee: Where Did My Taxes Go?
19 September 2016
Next
3
Year-end tax planning for 2016 – Part 1
19 September 2016
September 19, 2016 by Marci Flanery in Self-employment taxes

Urban stylish trendy young teenage people with dog

In a previous blog post we discussed how taxes “seem” to increase when you go from being a wage earner to being self-employed. The analysis in that article assumed that the taxpayer was a single individual – which made the calculations a little easier. The topic today is: How much should a self-employed person expect to pay in taxes if they are married? As we noted in our earlier blog post, the answer is, unfortunately, more.  A good rule of thumb is that you should save about 30% of your net self-employment income will be paid as taxes.

Let’s start with our base case that we used in our previous blog post, a self-employed person who is single. The following table shows how much tax would be due at various income levels (assuming no itemized deductions) and we also calculated what that tax is as a percentage of your SE income.

Net Business Income Combined Income & SE Tax Tax as a % of Income
25,000 5,010 20%
50,000 12,030 24%
75,000 21,247 28%
100,000 30,580 31%
125,000 40,377 32%
150,000 48,279 32%

It is probably easiest to illustrate the effect of different joint income levels using a series of examples. Find the example that best fits you and your spouse’s income levels and that will give you an idea of how much you should hold back for taxes each quarter. For instance, if you believe your self-employment income (after business expenses are deducted) is going to be about 50k and your spouse’s taxable salary is going to be about 100k, you would look at Example 3. We’ve highlighted the appropriate row in the table in example 3 showing that you should plan to save and pay about 29% of your net self-employment income as quarterly estimated payments during the year.

Example 1 – Your spouse’s wages = $0

Your SE Income Spouse’s Wages

Combined

Tax

Your Share of Tax

 

Your Tax %

25,000 0 3,796 3,796 15
50,000 0 10,024 10,024 20
75,000 0 17,043 17,043 23
100,000 0 24,056 24,056 24
125,000 0 33,143 33,143 27
150,000 0 40,310 40,310 27

Example 2 – Your spouse’s wages = $50,000

Your SE Income Spouse’s Wages

Combined

Tax

Your Share of Tax

 

Your Tax %

25,000 50,000 10,503 5,856 23
50,000 50,000 17,621 12,343 25
75,000 50,000 26,966 20,418 27
100,000 50,000 36,301 28,911 29
125,000 50,000 45,642 37,648 30
150,000 50,000 53375 44709 30

Example 3 – Your spouse’s wages = $100,000

Your SE Income Spouse’s Wages

Combined

Tax

Your Share of Tax

 

Your Tax %

25,000 100,000 20,778 6,981 28
50,000 100,000 30,119 14,750 29
75,000 100,000 39,460 22,967 31
100,000 100,000 49,435 31,783 32
125,000 100,000 59,473 40,890 33
150,000 100,000 67,375 47,909 32

 

Example 4 – Your spouse’s wages = $150,000

Your SE Income Spouse’s Wages

Combined

Tax

Your Share of Tax

 

Your Tax %

25,000 150,000 33,321 7,788 31
50,000 150,000 43,359 16,139 32
75,000 150,000 53,397 24,864 33
100,000 150,000 63,435 33,852 34
125,000 150,000 74,368 43,437 35
150,000 150,000 83,702 51,207 34

Married Filing Separate IS NOT a Solution

A question we often get at this point is, well, we will just file as single then. But, this is not an option. If you are married, your only filing choices are married filing separate or married filing joint. At best, married filing separate result in the same combined tax bill. More likely, married filing separate will result in a larger tax bill.

So, if you are planning on being self-employed, you should plan on paying about 30% or more of your net self-employment income as taxes each year and you should set your billing rates accordingly. If you save too much, you can always use the excess to establish a retirement plan – which will actually lower your taxes even more. But, that’s a topic for another post.

1
Recommend
  • Facebook
  • Twitter
  • LinkedIN
Share
  • FICA
  • Independent contractor
  • self-employed
  • self-employment
Tagged in
Leave a reply

Click here to cancel reply.

Recent Posts

  • COVID-19 Pandemic
  • Tax Aspects and Reporting of Cryptocurrency
  • Washington State Estate Taxes
  • How Long Should I Retain Records?
  • Donor Advised Fund – Part II

Recent Comments

  • Jim in Conroe on When You Should Reconsider Your Withholding
  • Jim in Conroe on Online Sales Taxes After Wayfair
  • web lackey on Online Sales Taxes After Wayfair
  • Jim in Conroe on Online Sales Taxes After Wayfair
  • FlaneryCPA.com | Year-end tax planning for 2016 – Part 5 on Year-end tax planning for 2016 – Part 4
© FlaneryCPA
FlaneryCPA.com