The self-employment tax is added on top of the income tax you must pay as a self-employed individual or married couple. This creates a very heavy burden that you probably would prefer to avoid.

In essence, the self-employment tax is in place of the share of social security and medicare taxes normally paid by an employer on behalf of an employee. Since the self-employed person is both an employer and employee, he must pay the tax for himself, whether or not he is on the company payroll.

As the tax tracks the income of the self-employed person, it is an additional layer of tax, on top of the income tax itself. This places an even greater premium on planning your business activities to reduce taxable income, even while managing your business for profitability. The good news is that most of what you do to reduce your ordinary taxable income will also reduce your self-employment tax as well.

But there are at least three items to consider that are different from calculating what is taxable for ordinary income tax purposes. First, only the first $102,000 of income is subject to self-employment tax. If you are fortunate enough to have income that is likely to be significantly greater than this, you will not have to worry about this extra layer of tax as you budget and plan for your income.

Second, 50% of the self-employment tax itself is deductible from ordinary income. This creates a negligible planning opportunity because this amount would be deductible for any employee, yet it is worthy of consideration in your individual situation as you are preparing your returns.

The last consideration is that, rarely but occasionally, it can be to your benefit to be treated as an employee who is NOT self-employed in order to avoid the tax altogether.

Calculators are available through TurboTax Online or other tools your tax preparer may have to tell you if you have a unique situation where this may apply.