One-half of Self-employment Tax

Self-employed taxpayers can subtract half of their self-employment tax from their income. This is equal to the amount of social security tax and Medicare tax that an employer pays for an employee, which is excluded from an employee’s income.

If you establish during the interview that the taxpayers have self-employment income, calculate the self-employment tax using Form 1040 (Schedule SE), Self-Employment Tax. Enter half of the self-employment tax from line 6 of Schedule SE on Form 1040, line 27.