Solopreneur taxes

U.S. solopreneurs usually report business profit on Schedule C and pay two taxes on it: income tax and self-employment (SE) tax.

Self-employment tax

15.3% on 92.35% of net self-employment earnings: 12.4% Social Security (up to the annual wage base) plus 2.9% Medicare, with an additional 0.9% Medicare tax above certain thresholds. It applies once net SE earnings reach $400 (IRS). Half of SE tax is deductible when figuring adjusted gross income. Estimate it with the SE tax estimator.

Quarterly estimated taxes

If you expect to owe $1,000+ for the year, you generally pay four times a year using Form 1040-ES (IRS: estimated taxes).

Common deductions

• Home office (IRS)
• Business use of a car
• Software, equipment, supplies, professional fees
• Self-employed health insurance and retirement contributions (SEP, solo 401(k)), subject to the rules

Records

Use a separate business account, keep receipts and log mileage. See accounting software.

Tax ID

Sole proprietors can use their SSN, but a free EIN keeps your SSN private.

General information, not tax advice. Tax reviewer (CPA/EA): to be added.