What total percentage of taxes can someone who is self-employed expect to have to deduct from their gross?

Question

If one makes a gross income of 80,000.00 per year, what is the percentage that should be held back to cover the quarterly taxes? Does 30% or 45% seem more accurate? I'm worried that we may not be saving enough. Can anyone explain the breakdown of the taxes, what percentage is FICA, income tax, self-employment tax, etc.? Thank you.

Answer 1

FICA and Self-employment tax is the same thing... for self employed people, it will be 14.13% of your net self employment income.

Regular income tax will depend on a lot of things, such as any other income, your family size, your deductions, etc.  I'm single and made a little under 80k in business income last year, and my net tax percentage was around 12.5%.  If you have less deductions, it will be higher, or a big family and more deductions, it will be smaller.

So for federal taxes, 27-30% should be good, maybe 35% if you have few deductions or other income.  

Also, if you have to pay state and/or local taxes, make sure you keep out money for them as well.

Answer 2

Self employment tax is for social security and medicare, and will be around 14%.  If you are married filing a joint return and the $80K is your only income, 30% should cover it if you aren't in a high-income-tax state - if you are, figure more like 35%.

You need to make quarterly estimated payments for federal, and for state and/or local if they have an income tax.

Answer 3

Nothing is deducted from your gross.  You have to estimate how much you need to hold back.

http://www.irs.gov/pub/irs-pdf/f1040es.p...