Self-employment tax is mostly vocabulary. These are the words that decide which rules apply to you, and each one links to where the question gets worked through in full.
Structure decides who reports the income and on which return. Most of the confusion in self-employment tax starts here.
A business whose profit is not taxed at the entity level but passes through to the owners, who report it on their personal returns. Sole proprietorships, partnerships, most LLCs and S corporations all work this way. The business files, but the tax is paid by the people.
Where we cover itA formal choice about how an entity is TAXED, which is separate from what it legally IS. An LLC is a legal structure and can elect to be taxed as a sole proprietorship, a partnership or an S corporation. Changing the election does not change the entity, and changing the entity does not change the election.
Where we cover itLimited liability companies: a state-law structure that separates business liability from personal assets. An LLC has no tax treatment of its own, which is the single most common misunderstanding about it. By default a single-member LLC is taxed exactly like a sole proprietorship.
Where we cover itBusiness income minus allowable business expenses. It is the figure self-employment tax is calculated on and the figure that flows to the personal return, which is why an expense that is disallowed costs more than its own value.
Where we cover itWorking remotely means more than one state can have a claim on the same income. These are the terms that decide which.
The connection between a business and a state sufficient for that state to impose tax or a filing obligation. It is a threshold question, not a matter of degree: either the connection exists or it does not, and crossing it is often a single sale rather than an ongoing presence.
Where we cover itNexus created by sales volume alone, with no physical presence in the state. Thresholds are set per state, commonly by revenue or by transaction count, and are why an entirely remote seller can acquire filing obligations in states they have never been to.
Where we cover itBusinesses selling into a state from outside it. Since the move to economic nexus, remote sellers are the group most likely to owe in a place they have no office, no staff and no inventory.
Where we cover itThe federal limit on how much state and local tax can be deducted on an itemised return. It matters most to people in high-tax states, and it is the reason several states created entity-level workarounds that shift the deduction from the individual to the business.
Where we cover itIncome sourced to a particular state under that state rules. Sourcing is not the same as where you live or where you banked the payment: the same dollar can be taxable in the state where the work was performed and reportable in the state where you reside.
Where we cover itAdjusted gross income on the federal return. Most states start their own calculation from this figure and then add and subtract from it, which is why a federal change quietly moves a state bill that nobody edited.
Where we cover itThe deduction methods, and the record-keeping each one actually requires.
A flat per-square-foot calculation for the home office deduction, capped at a set area. It requires far less documentation than tracking real costs and usually produces a smaller deduction. Choosing it is a trade of money for record-keeping, and it can be reconsidered year to year.
Where we cover itThe alternative to the simplified method: deducting the business-use share of real housing costs, including mortgage interest, utilities, insurance and repairs. It generally produces a larger deduction and requires you to have kept the receipts to prove it.
Where we cover itCosts claimed for the space and equipment used to run the business. The hard requirement is usually exclusivity rather than expense: a space used for both work and anything else generally does not qualify, however much work happens there.
Where we cover itSpreading the cost of an asset across the years it is used rather than deducting it all at once. It matters beyond the deduction itself, because depreciation taken on a home office can come back as taxable when the home is sold.
Where we cover itThe documentation that turns a claimed deduction into a defensible one. The practical standard is contemporaneous: records made at the time carry weight, and a reconstruction made under audit carries much less.
Where we cover itThe amount above which a platform or payer must issue an information return. It governs whether the income is REPORTED to the tax authority, not whether it is taxable. Income below every threshold is still income.
Where we cover itPairs that get used as synonyms and are not. Each one changes what you owe or where you owe it.
An LLC is a legal structure created under state law; a tax election is how that structure is taxed federally. They are set separately. Forming an LLC changes your liability exposure and, by default, changes nothing about your taxes, which is the opposite of what most people expect when they form one.
Where this bitesNexus is the general concept: a connection strong enough for a state to tax you. Economic nexus is one specific way to create it, through sales volume alone with no physical presence. You can have nexus without economic nexus, and economic nexus is the kind a fully remote business trips without noticing.
Where this bitesTwo ways to compute the same home office deduction. The simplified method is a flat rate per square foot with minimal records; actual-expense claims the business share of real costs and usually yields more. The choice is a trade between the size of the deduction and the records you must keep.
Where this bitesA reporting threshold decides whether a platform tells the tax authority about your income. Net profit is what you actually owe tax on. Falling below a reporting threshold means no form arrives; it does not mean the income is untaxed, and treating it that way is the most expensive assumption on this page.
Where this bitesState income is what a state taxes. The SALT cap is a FEDERAL limit on deducting that state tax on your federal return. The cap does not reduce what the state charges; it reduces how much of it you can subtract federally, which is why high-tax states created entity-level workarounds.
Where this bitesOffice deductions cover ongoing costs of operating the space. Depreciation covers the cost of an asset spread over its life, and it has a tail: depreciation claimed on a home office can be recaptured as taxable income when the property is sold, long after the deduction was taken.
Where this bitesThese describe how the terms are used in United States tax practice. They are not tax advice, thresholds and rules change every year, and state treatment differs from federal. Check the current year guidance or a professional before acting on any of it.