CFP

AAA

Income Tax Fundamentals and Calculations - Self-Employment Tax

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
comments powered by Disqus
Related Articles
  1. Fee-Only Financial Advisers: What You ...
    Investing Basics

    Fee-Only Financial Advisers: What You ...

  2. Another Sound Lesson In Risk Management
    Investing News

    Another Sound Lesson In Risk Management

  3. Choosing The Right ETF Index To Reach ...
    Investing News

    Choosing The Right ETF Index To Reach ...

  4. Using Normal Distribution Formula To ...
    Investing Basics

    Using Normal Distribution Formula To ...

  5. Hypothesis Testing in Finance: Concept ...
    Active Trading Fundamentals

    Hypothesis Testing in Finance: Concept ...

Trading Center