Self-employment tax

[Anonymous]

Can self-employment tax be offset by refundable tax credits such as the EITC? Or is it only reduced by reducing your AGI?

[Anonymous]

If speaking strictly about the self employment tax (SS and Medicare, NOT the insidiously income tax on the business proceeds), it is calculated based on your business net profit separately from the 1040, so 1040 AGI won't reduce the self employment tax. Refundable credits would offset the self employment tax amounts, the same way they would be refunded to you even if your tax for the year was Zero.

[Anonymous]

Anonymous wrote:If speaking strictly about the self employment tax (SS and Medicare, NOT the insidiously income tax on the business proceeds), it is calculated based on your business net profit separately from the 1040, so 1040 AGI won't reduce the self employment tax. Refundable credits would offset the self employment tax amounts, the same way they would be refunded to you even if your tax for the year was Zero.

Thank you!

[Anonymous]

Not sure how "individual" got corrected to "insidiously". Sorry about that.

[Anonymous]

No worries...the income tax is pretty insidious

[Anonymous]

what I don't get is why have I have to estimate on yearly income when I don't know what I"ll be earning in the coming year. I know it's just an estimate, but why I can't I estimate based on quarterly projections? That's more realistic.