Earning on Steemit? You May Have US Self-Employment Taxes to Pay

Yes, the IRS guidance came out saying crypto currencies are treated like securities rather than currency. However, this is only part of the story...

Whenever you create something or do some kind of service, the money you receive for this is always going to be considered self-employment income rather than capital gains income. This is a topic that is constantly confusing for artists, writers and musicians as well, as royalties are the same thing. If you write a book and publish it on Amazon you receive royalties, but really this is self-employment income because you did the work of writing the book, and the pay is the royalties you receive.

So what is the big deal? A rose by any other name... Not so fast. There is a big difference in tax law with how types of income are categorized. Capital gains income if held for over one year has special lower tax rates that are much lower applied to it. Yay for the #hodl crowd out there. Hang on for over a year and you are set. But less than one year it is taxed as ordinary income.

So then if short-term or self employment is it the same tax rate? Yes and no. Yes, the income tax rate is the same. No for a couple reasons: 1. There is a new 20% deduction available for 2018 taxes next year for most business income if you earn less than $315k in a year. 2. There is an additional tax due, aptly named Self-Employment Tax. This 15.3% tax is due on your net earnings and is the substitute for social security and medicare taxes that if you earned a paycheck would come out there.

There are a lot of things that can be done to minimize self-employment tax burdens. You can deduct all the expenses incurred in your business (that new computer, your home office, professional research, etc.) before you pay any taxes, so it is really great on that side. Especially now that they have taken away investment expense deductions...