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Laureen Miles Brunelli

The Bad News, Good News of Self-Employment Tax

By January 31, 2013

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Let's go with the bad news first. For 2013, self-employment taxes will increase 2 percent. The good news is that, unlike employed people, you won't pay this tax increase for another year, when you file your 2013 taxes. For traditionally employed people, this 2 percent is coming out of their paychecks now.

The tax deal passed by Congress in December 2010 included a 2-percent decrease in payroll taxes, but that deal has now expired and taxes are back to where they were previously. However, since self-employed people pay these "payroll" taxes (Social Security and Medicare) via the self-employment tax, which is calculated on a Schedule SE and entered on the 1040 for our 2013 income taxes, we have another year.

That said, you will pay it just the same, so be prepared. Be sure you withhold enough taxes during 2013 to cover the new higher self-employment tax so you aren't hit with a big bill a year from now.

For more about self-employment tax, including how much of it is deductible and who must pay it, see this Self-Employment Tax FAQ.

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