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.