Self Employment Tax

Self employment tax of 15.3% is imposed on the net profit from all trades and businesses. It can apply to sole proprietors, partners, and members in an LLC. This tax is in addition to income tax and is meant to cover both the employer and employee portions of social security and medicare for the self employed. This can come as a shock to those who quit their W2 job and start their own business. They may have no taxable income but yet still owe tax if they had a net profit on their new business.

Self Employed Health Insurance

Great news! For 2010, you can now subtract self employed health insurance from income in the calculation of self employment tax on schedule SE.