Calculating Self-Employment Tax When Married Filing Jointly
Understand how to calculate and report self-employment tax for each spouse on a joint return, ensuring accurate payments and proper social security credits.
Self-employment tax is a combination of Social Security and Medicare taxes for individuals who work for themselves, comparable to taxes withheld from an employee’s paycheck. When a married couple files a joint tax return, the calculation and reporting of this tax have specific rules that differ from how other income is treated. The process requires individual calculations for each spouse before the final amounts are combined on the joint return, ensuring both receive proper credit for their earnings.
Determining Each Spouse’s Self-Employment Income
When filing a joint return, self-employment income is not combined. Each spouse must calculate their net earnings from their own business activities independently. If both spouses are self-employed, they will each track their income and expenses separately for tax purposes.
Self-employment income includes revenue from a trade or business operated as a sole proprietor, independent contractor, or partner. The calculation starts with the business’s gross income, from which all ordinary and necessary business expenses are subtracted. The resulting net profit is the basis for the self-employment tax calculation.
For instance, if one spouse is a freelance graphic designer and the other runs a landscaping business, they would calculate their net profits separately. The designer would subtract expenses like software from their client payments. The landscaper would deduct costs like equipment and fuel from their customer payments, with each arriving at their own distinct net profit.
Calculating the Self-Employment Tax
The tax calculation is performed for each spouse individually. First, determine the “net earnings from self-employment” by taking 92.35% of the business’s net profit. This figure, not the total net profit, is what is subject to tax. This adjustment accounts for the fact that employees do not pay FICA taxes on the portion their employer contributes.
A tax rate of 15.3% is applied to the net earnings from self-employment. This rate consists of 12.4% for Social Security and 2.9% for Medicare. The Social Security portion applies only up to an annual income limit ($168,600 for 2024; projected $176,100 for 2025). The 2.9% Medicare tax applies to all net earnings without a limit.
The Social Security wage base limit applies to each spouse’s total earnings, including any W-2 wages. For example, if one spouse earns $180,000 from a W-2 job, they have already met the annual Social Security tax limit. If that spouse also has $20,000 in net earnings from a side business, that amount will only be subject to the 2.9% Medicare tax.
If both spouses are self-employed, the limit is applied to each of them separately. If one spouse has $200,000 in net earnings and the other has $50,000, the first spouse pays the 12.4% Social Security tax on the first $168,600 (for 2024) of their earnings. The second spouse pays it on their full $50,000. Both will pay the 2.9% Medicare tax on their entire respective net earnings. An additional Medicare tax of 0.9% may also apply if the couple’s combined income exceeds $250,000.
Required Tax Forms and Joint Return Reporting
Each self-employed spouse is required to prepare their own Schedule C, Profit or Loss from Business. This form is where the business’s gross income and detailed expenses are listed to arrive at the net profit or loss figure.
Each spouse with net earnings of $400 or more must also file a separate Schedule SE, Self-Employment Tax. This form is used to apply the 92.35% factor to the net profit from Schedule C and calculate the 15.3% tax, accounting for the Social Security wage base. If both spouses have self-employment income, two separate Schedule SE forms are required.
The results from these individual schedules are carried over to Form 1040. The total self-employment tax from all Schedule SE forms is reported on Schedule 2, “Additional Taxes,” and added to the couple’s total tax liability. Taxpayers can also deduct one-half of their total self-employment tax on Schedule 1, “Additional Income and Adjustments to Income,” which reduces the couple’s adjusted gross income (AGI).
Special Considerations for Married Business Owners
Married couples who operate a business together can consider a Qualified Joint Venture (QJV). A QJV is an unincorporated business owned by a married couple filing a joint return. To be eligible, both spouses must materially participate in the business, and it cannot be a state law entity like an LLC or partnership.
A QJV simplifies tax filing by allowing the couple to avoid a complex partnership return (Form 1065). Instead, they divide the business’s income and expenses according to their respective interests. Each spouse then reports their share on a separate Schedule C and Schedule SE, ensuring each receives credit for Social Security and Medicare earnings.
Alternatively, one spouse can formally employ the other in their sole proprietorship. The employee-spouse receives wages subject to income tax withholding, Social Security, and Medicare (FICA) taxes. The employer-spouse deducts these wages as a business expense on their Schedule C and pays the employer’s share of payroll taxes. This structure has different reporting requirements than a partnership or QJV.