If I work for myself how much tax do I have to pay (in the U.S.)?

Question

I know state taxes would be different from state to state. In terms of federal tax if I am a sole proprietor what percentage of my income would I have to give the government? Assume I would make 40 - 50k per year. Also what other things would be taken out of the money I make? I know I would probably have to pay FICA because I've always seen that on my checks, is there anything else though and if so how much or what % would it be?

Answer 1

If you are self employed, you pay double FICA, the employer's half and the employee's half. That comes to 15%. Then there is Medicare, and Federal income tax. Tax documentation will be out soon, you can look up the tax brackets. There are special rules for farmers, railroad workers, clergy, etc. The IRS has some free documents for small business owners, but they would not be very aggressive about tax avoidance.

Important note: Legitimate Business expenses (keep receipts) are deducted from business revenue before taxes.

My Advice is to buy the small business edition of Turbo Tax (available now) and play with it. You can plug numbers in and see what it predicts you will owe.

Answer 2

For self-employment tax (for social security and medicare) you'll pay around 15%. If you are single, with income of $40-50K per year you'd pay around another 15% or so for federal income tax. And as you say, state tax would depend on where you are.

Answer 3

Fill out Schedules C and SE, and you will find your answer.