Nebraska Self Employment Tax Laws
Posted by Courtney
The self-employment tax for 2006 remained at the level of 15.3%, a combination of 12.4% for Social Security and 2.9% for Medicare. The maximum amount of income subject to the Social Security portion was raised to $94,200 by the federal government. Self-employed persons must pay a self-employment tax to support Social Security and Medicare.
These requirements apply to a sole proprietor of a business, a professional who owns his or her own practice and to independent contractors. Self-employed individuals are allowed to deduct one-half of their self-employment tax when figuring adjusted gross income. As is clear from these instructions, and those provided by other state revenue departments, the self-employment tax is a federal tax.
However, Nebraska and other states are involved in taxing individual income with general state income tax and with self-employment income in special situations. For example, in Nebraska, churches are required to withhold from all employees except ordained staff. An ordained staff member may elect voluntary withholding for tax purposes.
The church would then pay the ordained staff member prior to the dates for quarterly payment of estimated taxes – April 15, June, September, and January. In addition, ministers must pay the self-employment tax unless they have followed the Internal Revenue Service guidelines for opting out of the Social Security program.
In addition, the state of Nebraska provides strict guidelines for handling self-employment income when child support amounts are being determined by the court or by a hearing officer. Specifically, one of the items listed under deductions in state information, for determining child support amounts, is Social Security deductions, or any other mandatory contributions in lieu of Social Security deductions including self-employment tax paid.
The amount of self-employment tax paid as required by the Internal Revenue Service (federal) is also taken into account when determining income levels for the Nebraska Homestead Exemption. On the Homestead Exemption application, a line is provided for adjustments to income, including self-employment tax paid.
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