Tax
Self-employment tax
The Social Security portion capped at the wage base plus the uncapped Medicare portion.
The Formula
SE tax = 12.4% x min(profit x 0.9235, wage base) + 2.9% x (profit x 0.9235)
The Social Security portion capped at the wage base plus the uncapped Medicare portion.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| P | Net profit | currency | Profit after business expenses. |
| W | Wage base | currency | Annual cap for Social Security tax. |
What Each Symbol Means
Pcurrency
Net profit
Profit after business expenses.
Wcurrency
Wage base
Annual cap for Social Security tax.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate self employment tax page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Self Employment Tax, filed under Finance. Every number the guide produces comes from substituting into this one line.