Calculate self-employment tax with Schedule SE

What is Schedule SE?

You can use Schedule SE to calculate self-employment tax if you and/or your spouse has self-employment income from freelancing, gig work, or running your own business.

• You must file the form if you report at least $400 in net earnings from self-employment on Schedule C or Schedule F for farming income.
• You have to file Schedule SE if you are a general partner in a Partnership and receive Schedule K-1 (Form 1065).
• There are also special rules and filing requirements for church employees who receive at least $108.28 in compensation during the year and for members of the clergy.

For 2023, the maximum income per person that is subject to self-employment tax is $160,200.

Configuring self-employment tax

This information is mainly for Schedule C filers and Schedule K-1 (Form 1065) recipients who do not select the optional method in Part II.

Most taxpayers who are not church employees or do not earn farming income report the net profit or loss from each Schedule K-1 or C on Lines 1a and 2, respectively. If you have multiple sources of self-employment income, they must be netted together. However, if you are married, filing a joint tax return, and operate a business as a qualified joint venture, each person must file their own Schedule SE to properly pay their own self-employment taxes.

When you net the total profit and loss from each activity on Line 3, enter the result on Line 4a.

• If it is less than $400, you don’t have to file Schedule SE.
• If it is $400 or more, the total will be multiplied by 92.35% to allow for the 7.65% payroll tax deduction.

 If you have income reported on Form W-2, report on Line 8a the amounts in Boxes 3 and 7 for Social Security wages and tips. On lines 8b and 8c, report unreported tip income and wages subject to Social Security taxes where you did not receive a Form W-2. You need to report these items in case your total maximum income subject to Social Security and Medicare taxes exceeds the annual cap, so you don’t overpay this tax. Since Medicare taxes have no limit, you still need to configure this amount on Line 11.

Report the total self-employment tax on Line 12 and carry this to Schedule 2 of Form 1040. Calculate the deduction for one-half of self-employment tax on Line 13 and carry this to Schedule 1 of Form 1040.

The optional method

Part II mainly applies to farming income reported on Schedule F, with net profit under $7,103 or gross income under $9,840.

There is also a non-farm optional method that you can use if:

• You had at least $400 in net earnings from self-employment in at least 2 of the past 3 tax years.
• Your net non-farm profits were less than $7,103 and represented less than 72.189% of your total gross income.

You can use this method a maximum of 5 times if you are not a farmer.

Confused? We can help. A Jackson Hewitt Tax Pro can explain this form and help you fill it out, with any supporting documentation or calculations you may need. Taxes can be complicated, but you are not on your own – contact us today. 

About the Author

Mark Steber is Senior Vice President and Chief Tax Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.

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