Self-employment Taxes are the taxes paid by self-employed business owners for Social Security and Medicare. These are the same amounts as paid by employers and employees for payroll taxes, except that the self-employed business owner pays the entire amount. For 2008, the self-employment tax amount is 15.30 percent of the business profit. The business owner is able to for one-half of the amount of the self-employment tax, but he or she must still pay the entire amount of the tax, along with income tax.
To use an example, let's say a business owner had $100,000 in profits for the business in 2008. The self-employment tax on this profit would be $15,300. The employer could reduce his gross income by $7,650 for the year but he would still have to pay the $15,300, along with the tax on the profits. It's a little more complicated than that (of course). The self-employment tax is calculated on a Schedule SE.
