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1099-INT Income Tax Related Questions

sams1985
  |     |   781 posts since 2022

I know this question is obviously better suited for my accountant but since 2022 was my first major year of 1099 interest income and this is all new to me i figured i'd get some opinions as im sure many of us are in the same boat. Excuse the total ignorance,

Will the 1099 income be taxed as ordinary income and then will it be subject to a 15% self employment tax on top of that?(which i just read)That seems like a massive tax burden and i'm questioning whether CD's are even worth it.

I broke one CD this year (7k) which i learned can be used to offset 1099-INT income thanks to this forum. I also have a 3k max capital gains loss i can apply. Any other tips to reduce 1099 interest income?

Could managing personal 'funds" be considered a self-employed gig (esp with all the bank hopping this year) or is that a stretch? I only ask because that brings up the possibility of some 1099 deductions and maybe the self employment tax deduction?

***EDIT***

Some websites are saying you don’t have to pay self-employment tax on income from capital gains, interest, dividends, and other income that is not considered “earned” income.

?

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Answers
LongTimeDAFan
  |     |   69 posts since 2022
Sam, self-employment tax is only on earned income. Per the IRS website, "Earned income includes all the taxable income and wages you get from working for someone else, yourself or from a business or farm you own."
Self-employment tax is not on interest income, dividend income or capital gains income. Just earned income. Just like you cannot count interest income or capital gains income to qualify for an IRA. You have to have earned income to qualify for an IRA (meaning contribute to an IRA for that tax year).
So, no earned income = no self-employment tax, and also = no IRA contribution that year either.
Hope this helps.
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4
sams1985
  |     |   781 posts since 2022
Yes, thank you so much for confirming. Almost had a mini-heart attack.
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