Self-Employment Income Tax

Updated: Oct 4

Self-employed taxpayers usually face two types of taxes which is a 3.8% net investment income tax and 0.9% additional Medicare tax on self-employment income. The 3.8% tax only affects those whose AGI exceeds $250,000 for joint filers. If AGI is above the threshold the 3.8% tax is the lesser of your net investment income for the year or the excess of your AGI over your threshold amount.


Distributions from qualified retirement plans are not subject to the net investment income tax. However, they may push your AGI over the threshold which may in return cause other income to be subject to the tax.


Roth IRAs are neither subject to the net investment income tax nor included in AGI which may appeal more taxpayers.


The 0.9% Medicare tax applies to wages more than $250,000 for joint filers and $200,000 for others. This tax is in addition to the regular 2.9% Medicare tax on all self-employment income.


To discuss these matters more in depth please reach out to our office and speak to a professional.

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