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The Self-Employment tax calculation is: ((earnings * .9235) * .153)/2 — e.g. my earnings are 36,000. Tax bill is 2,543.32 and net earnings is $33,456.68.

If I have $12,000 in bills for the year, what's the formula to find out how much I'll need to earn to cover only those bills accounting for taxes taken out?

Victor Bureau
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  • There's a specific stack exchange site called Finances or something that can help you with specific details too, if this is an actual real-life question. – The Count Jun 01 '19 at 20:43
  • and a tag f8nances here @TheCount –  Jun 07 '19 at 21:30

1 Answers1

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Your tax rate appears to be $7.06\%$ and you must multiply your net by $107.6\%$ to find the gross you need to earn to pay bills. For an unknown or changing tax rate, you can use the formula below. I have used your current tax rate on $\$12000$ to show how it works.

Let $g=gross\qquad n=net\qquad t=tax\space rate$

$\text{We know that }n=g-(gt)=g(1-t)\text{ so }$ $$\mathbf{g=\frac{n}{1-t}}=\frac{\$12000}{1-(0.9235*0.153/2)}=\$12912.22$$

poetasis
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  • Thanks for replying! Is the percentage always the same? I don't know the starting value of 36,000 nor 2,543.32 to get that 107.6%.

    I'm looking to take a total bills number and arrive at an annual earnings that includes the SE tax on top for gross, so that my net earnings covers the bills.

     – Victor Bureau Jun 01 '19 at 19:52
  • :) My post shows an example of the formula for self-employment tax in the US as a reference to add on the tax. What I am looking for is to find out how much I need to earn in order to pay off an exact bills dollar amount but also include taxes. E.g. if I have $10,000 in bills, what do I need to earn including SE tax to pay the $10,000? If I don't know how much I need to earn then I can't calculate * 0.9235 * 0.153/2 etc. – Victor Bureau Jun 03 '19 at 14:10
  • For example, I'm using the formula for SE tax in a spreadsheet. If I need 1,000 in net earnings to pay bills with SE taxes included, then it looks like I need 1,076.02. I only got that number because I just kept lowering the number until the net earning was 1,000 after taxes. How can I arrive to get that 1,076.02 number knowing I need a net earning of 1,000? – Victor Bureau Jun 03 '19 at 14:28
  • @Victor Bureau I edited my answer to remove some junk and show you how it works when all you know is $$12000$ and a tax rate that could vary. – poetasis Jun 07 '19 at 16:59
  • 7.064775% of the earnings pretax. you forgot to convert to markup on the after tax amount ... –  Jun 07 '19 at 18:14
  • @Roddy MacPhee Try subtracting $7.064775%$ of $$12912.22$ from $$12912.22$ and see what you get. It should leave $$12000$. What more can we need? – poetasis Jun 07 '19 at 18:28
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    okay point moot except rounding percentages. –  Jun 07 '19 at 18:31