Can I Take Any Deductions for Paying Self-Employment Taxes?
Can I take any deductions for paying self-employment taxes?Answer: Yes! Deduction #1: You can reduce your net earnings from self-employment by half of the total Social Security taxes you paid. For example, if your total self-employed Social Security taxes are $1,000, you can deduct $500 (one-half) from your net earnings. Why the IRS Allows This Deduction: If you were an employee of another company, your employer would contribute to your Social Security tax. You would not have to pay taxes on the amount that your employer pays on your behalf so the IRS allows you to deduct one half of what you pay for Social Security self-employment taxes from you net earnings. Deduction #2: You can also take a deduction for half of your Social Security tax on IRS Form 1040, but two important restrictions apply: • You must take the deduction your gross income (not your adjusted gross income); and • It cannot be an item
