The Self-Employment (SE) tax rules for 2011 tax returns are different than the rules for 2010 tax returns, which were different than the rules for 2009 tax returns.
The Job Creation Act of 2010 reduced the Social Security tax component of the SE tax from 12.4% to 10.4%, for 2011 only. Therefore, the SE tax rate on the first $106,800 of 2011 net SE income is "only" 13.3% (10.4% for FICA and 2.9% for Medicare) versus the normal 15.3%. Since the temporary SE tax reduction only affects the first $106,800 of 2011 net SE income, the maximum amount that a farmer can save is $2,136 ($106,800 times 2%).
What you may not know is that the 2011 above-the-line federal income tax deduction (most states allow the deduction also) remains unchanged. Before 2011, the deduction was a straightforward 50% of the SE tax bill. For 2011, the deduction equals 57.51% of the SE tax amount, as long as the amount does not exceed $14,204 (the SE tax on $106,800 of net SE income). If the SE tax exceeds this amount, you multiply it by 50% and add $1,067.
The effect is to allow a SE tax deduction equal to 50% of what the SE tax bill would have been if the Social Security tax component was the normal 12.4% (instead of the temporary 10.4%).
There has been an extension of this until February 29, 2012 and it may get extended, but we are dealing with Congress on this subject and who knows what will happen.
Also, one additional comment is that the self-employed health insurance premiums allowed as a deduction against SE income for 2010 in arriving at net SE tax owed has been eliminated for 2011. This means that your SE tax bill will be higher this year than 2010 assuming the same amount of health insurance premiums.