Self-Employment Tax
The Self-Employment Tax is how someone working within their own business (like a self-employed independent contractor) pays Medicare and Social Security taxes from their pay. By working for yourself,- you act as both the employer and the employee, so a self-employed person pays 15.3% total tax (which is 7.65% as the employer and 7.65% as the employee). The tax is composed of a Social Security tax of 12.4% on the first $113,700 of net self-employment income for 2013 and a Medicare tax of 2.9% on all net self-employment income.


If you work as an employee of another firm or organization, the employer and employee split the cost of these payroll taxes, each paying 7.65% of eligible wages. In addition, you can take a deduction for the 6.2% employer's share of Social Security along with 1.45% employer's share of Medicare as an above-the-line deduction if you are self-employed.
 





Tax Credits

Related Articles
  1. Small Business

    What Does It Mean To Be Self-Employed?

    A self-employed individual works for herself instead of working for an employer that pays a salary or hourly wage.
  2. Retirement

    How Social Security Works for the Self-Employed

    As both employee and employer, you have to pay more in Social Security, but there are deductions that can help lighten the tax burden.
  3. Taxes

    8 Tax Benefits For The Self-Employed

    Profitability in business depends on minimizing costs and maximizing resources. Here are several tax benefits that are available for the self-employed.
  4. Retirement

    Retirement Planning for the Self-Employed

    When you're self-employed, your retirement is entirely in your hands. Learn about the three retirement-savings options best suited to the entrepreneur.
  5. Retirement

    Understanding Your FICA Payments

    The Federal Insurance Contributions Act is a U.S. law that requires a paycheck deduction be paid to Social Security and Medicare.
  6. Taxes

    10 Tax Benefits for the Self-Employed

    Running your own business has both personal and financial perks.
  7. Taxes

    How To Calculate AGI For Tax Purposes

    The first step in completing your taxes is calculating your adjusted gross income. Here’s how.
  8. Retirement

    Self Employed? Avoid These 3 Retirement Mistakes

    Having a strategy for retirement is particularly important when you're self-employed, as there are certain pitfalls you must watch out for along the way.
  9. Taxes

    5 Most Taxing Taxes for Americans

    There’s not much that unites Americans like their hatred of taxes. Here's a list of taxes we dislike the most.
  10. Financial Advisor

    Tips for Reducing Health Insurance Expenses

    For many self-employed people, health insurance premiums can make up a hefty percentage of their budget. Here are some tips on how to deduct them.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center