Methodology — the self-employment engine

The self-employment tax itself

Net earnings from self-employment are 92.35% of net self-employment income (IRC §1402(a)(12)). The tax is 12.4% Social Security + 2.9% Medicare = 15.3%. The Social Security part applies only to what fits under the $184,500 wage base after W-2 wages — a job's wages consume the cap first (Schedule SE mechanics), which is why the state 1099 pages let you add W-2 wages.

The half-SE deduction

One half of the self-employment tax (excluding any Additional Medicare Tax) is deducted from gross income under IRC §164(f). It reduces the income tax — never the SE tax itself.

QBI: a simplified estimate, flagged as one

The engine models the §199A deduction in simplified form: 20% of qualified business income, capped at 20% of taxable income before QBI, with the OBBBA §199A(i) minimum of $400.00 when QBI reaches $1,000.00. Above the 2026 thresholds — $201,750.00 single, $403,500.00 married filing jointly — the W-2 wage / UBIA limits and the SSTB rules apply in real life and are NOT modeled: the engine still shows the simplified figure, flagged with a warning on the result. There, the real deduction can drop to zero.

Quarterly estimates

The annual total (federal income tax + SE tax + state income tax) is split into four equal installments on the IRC §6654 dates. The Form 1040-ES safe harbors (90% of the current-year tax, or 100–110% of the prior-year tax), the annualized-income installment method and underpayment penalties are NOT modeled.

Where the state layer is approximate

• State income tax reuses the annual wage-tax machinery on (W-2 + net SE) income; state-specific business deductions are not applied.
• Gross-receipts and business taxes are out of scope: Washington B&O, Ohio CAT, the New York City unincorporated business tax.
• The S-corp comparison is a coherence model, not advice: reasonable compensation is your input, and S-corp administration and state franchise taxes are not modeled.
• Not modeled: church-employee and minister rules, optional farm/nonfarm methods, SE losses, foreign earned income, community-property splits.