Self Employment Tax Calculator in Excel Spreadsheet

Get FREE Advanced Excel Exercises with Solutions!

In this article, we will learn to create a self employment tax calculator in an Excel spreadsheet. When you work as a freelancer or run a side business, you need to pay a self employment tax. Today, we will show how we can create a self employment tax calculator with easy steps. So, without further ado, let’s start the discussion.


What Is Self Employment Tax?

The self employment tax is the amount of tax that you need to pay when you are self-employed.

When you work full-time in a company, your employer takes social security and medicare taxes out of paychecks each pay period and pays half of those taxes.

But when you are self-employed you work both as an employee and the employer. For this reason, you need to cover the whole amount of the tax. You will also have to pay normal income tax with the self employment tax.

For the 2021 tax year, one needs to pay 15.3 % of the amount subject to self income tax as the self employment tax. This is the summation of the social security and medicare tax rates. Generally, the social security tax rate is 12.4 % and the medicare tax rate is 2.9 %.

The general formula of self employment text is:

Amount Subject to Self Income Tax*15.3%

Suppose, a person’s net income is $15000. Then, the amount on which the self employment tax will be applied is ($15000*92.35%) = $13,852.5. So, the total amount of self employment will be ($13,852.5*15.3%) = $2120. This will include the Social Security and Medicare taxes. We will show them individually in the following steps. So, let’s follow the steps below to make a self employment tax calculator in an Excel spreadsheet.


Self Employment Tax Calculator on Excel Spreadsheet: with Easy Steps

STEP 1: Create Dataset for Net Profit and Percentages

  • In the first place, we need to create datasets for net profit and percentages.
  • To calculate net profit, we need to know the Gross Income, Business Expenses, Deduction, Rent, and Utilities.

Step-by-Step Procedures to Create Self Employment Tax Calculator on Excel Spreadsheet

  • Different percentages are also used to find the self employment tax.
  • We must include these percentages in our dataset.
  • To calculate the amount subject to the self employment tax, we need to multiply the net profit by 92.35 %. We have stored this value in cell H5.
  • In this article, we have used 15.3 % as the current self employment tax rate. It is stored in cell H6.
  • Also, inserted the social security tax rate and medicare tax rate in cell H7 and H8 respectively.

Step-by-Step Procedures to Create Self Employment Tax Calculator on Excel Spreadsheet

  • Finally, the dataset will look like the picture below.

Step-by-Step Procedures to Create Self Employment Tax Calculator on Excel Spreadsheet


STEP 2: Calculate Net Profit Amount

  • Secondly, we will have to calculate the net profit amount.
  • To do so, insert the amount of the Gross Income, Business Expenses, Deduction, Rent, and Utilities.

Step-by-Step Procedures to Create Self Employment Tax Calculator on Excel Spreadsheet

  • After that, select cell C9 and type the formula below:
=C4-SUM(C5:C8)

Step-by-Step Procedures to Create Self Employment Tax Calculator on Excel Spreadsheet

In this formula, we have subtracted the summation of Business Expenses, Deduction, Rent, and Utilities from the Gross Income. We have used the SUM function to add all the expenses.

  • In the following step, press Enter to see the result.
  • If this value is greater than 0, then, we need to move to the next step.

Step-by-Step Procedures to Create Self Employment Tax Calculator on Excel Spreadsheet


STEP 3: Determine Amount Subject to Self-Income Tax

  • Thirdly, we need to determine the amount of net profit on which the self employment tax will be applicable.
  • For that purpose, select cell C11 and type the formula below:
=C9*H5

Step-by-Step Procedures to Create Self Employment Tax Calculator on Excel Spreadsheet

In this formula, cell C9 is the Net Profit, and cell H5 is the percentage that indicates the amount subject to the income tax. We have multiplied these two values to find the amount on which self employment is applicable.

  • Finally, hit Enter to see the result.

Step-by-Step Procedures to Create Self Employment Tax Calculator on Excel Spreadsheet

Read More: Income Tax Computation in Excel Format


STEP 4: Find Self Employment Tax

  • In the fourth step, we will calculate the amount of the self employment tax.
  • Select C12 and type the formula below:
=C11*H6

Step-by-Step Procedures to Create Self Employment Tax Calculator on Excel Spreadsheet

In this formula, we have multiplied the value of cell C11 by cell H6. In our case, cell H6 is the self employment tax rate. We have shown these values in STEP 1.

  • After that, press Enter to see the result.

Step-by-Step Procedures to Create Self Employment Tax Calculator on Excel Spreadsheet


STEP 5: Calculate Other Taxes

  • In the final step, we will calculate the other taxes.
  • Here, other taxes cover the Social Security tax and the Medicare tax.
  • We know that the self employment tax rate is 15.3 %.
  • Of this 15.3 %, 12.4 % is the Social Security tax rate and 2.9 % is the Medicare tax rate.
  • To calculate the Social Security tax, type the formula in cell C14:
=C12*H7

Here, cell H7 is the value of the social security tax rate and that is 12.4 %.

  • Press Enter to see the value.

  • Similarly, select cell C14 and type the formula below:
=C12*H8

In this case, cell H8 is the value of the medicare tax rate and that is 2.9 %.

  • Finally, hit Enter to see the result like the picture below.


Things to Remember

There are some things you need to remember while you are trying to make a self employment calculator in an Excel spreadsheet.

  • You must pay income tax with the self employment tax.
  • The percentages used here may vary. Enter your desired percentages while you are working with the self employment tax.
  • You need to extract the amount on which the self employment tax is applicable first and then, multiply it by 15.3 %.

Download Calculator

You can download the self employment tax calculator from here.


Conclusion

In this article, we have demonstrated step-by-step procedures to make a self employment tax Calculator in Excel Spreadsheet. I hope this article will help you to create a tally purchase order format easily. Moreover, you can use the template we have used here. To do so, download the workbook. We have added the workbook at the beginning of the article. Also, you can download it to test your skills. Last of all, if you have any suggestions or queries, feel free to ask in the comment section below.


Related Articles

<< Go Back to Excel Tax Calculator | Finance Templates | Excel Templates

What is ExcelDemy?

ExcelDemy - Learn Excel & Get Excel Solutions Center provides online Excel training , Excel consultancy services , free Excel tutorials, free support , and free Excel Templates for Excel professionals and businesses. Feel free to contact us with your Excel problems.
Mursalin Ibne Salehin
Mursalin Ibne Salehin

Mursalin Ibne Salehin holds a BSc in Electrical and Electronics Engineering from Bangladesh University of Engineering and Technology. Over the past 2 years, he has actively contributed to the ExcelDemy project, where he authored over 150 articles. He has also led a team with content development works. Currently, he is working as a Reviewer in the ExcelDemy Project. He likes using and learning about Microsoft Office, especially Excel. He is interested in data analysis with Excel, machine learning,... Read Full Bio

We will be happy to hear your thoughts

Leave a reply

Advanced Excel Exercises with Solutions PDF

 

 

ExcelDemy
Logo