Self Employed Contributions Act Tax - SECA Tax

AAA

DEFINITION of 'Self Employed Contributions Act Tax - SECA Tax'

A form of taxes that self-employed business owners must pay based on their net earnings from self-employment. Self Employed Contributions Act Tax (SECA Tax) was first imposed by the SEC Act of 1954.

Similar to the Federal Insurance Contributions Act Tax (FICA Tax) that employees pay, the payments fund Social Security, Old Age Survivors and Disability Insurance (OASDI) and Medicare programs.

INVESTOPEDIA EXPLAINS 'Self Employed Contributions Act Tax - SECA Tax'

The basic tax rate for SECA tax payments is twice the percentage rate that employees pay at source from their paychecks. This is to cover both the employer and employee portion of the payment. The employer portion of the payment, is deductible as a business expense.

If your net earnings are less than the minimum set each year, no SECA Tax is payable. If, however, your net earnings are above the minimum, you must pay SECA Tax on the entire amount (including the amount under the minimum).

RELATED TERMS
  1. Social Security

    A United States federal program of social insurance and benefits ...
  2. Medicare

    A U.S. federal health program that subsidizes people who meet ...
  3. Federal Insurance Contributions ...

    A U.S. law requiring a deduction from paychecks and income that ...
  4. Withholding Tax

    1. Income tax withheld from employees' wages and paid directly ...
  5. Earnings

    The amount of profit that a company produces during a specific ...
  6. IRS Publication 535 - Business ...

    A document published by the Internal Revenue Service (IRS) that ...
RELATED FAQS
  1. Does everyone have to file a federal tax return?

    This may come as a surprise to many individuals, but not everyone needs to file a federal tax return. According to the IRS, ... Read Full Answer >>
  2. In what instances does overhead qualify for certain tax allowances?

    Businesses are just as keen as anyone else to keep their tax burdens low by any means possible. Overhead expenses often qualify ... Read Full Answer >>
  3. How are write-offs recorded on my tax return?

    The way your write-offs are recorded on your tax return varies depending on whether you are filing a personal or business ... Read Full Answer >>
  4. What are the benefits of prorating expenses?

    When a person prorates expenses between personal and business expenses, he is able to capture the maximum amount of tax benefits ... Read Full Answer >>
  5. How can I tell which of my business expenses count as write-offs?

    Any basic, reasonably necessary expenses incurred in running a business can be considered possible write-offs. Such expenses ... Read Full Answer >>
  6. What are the most common business deductions and expenses for small businesses?

    Among the most common expenses and business deductions for small businesses are the expenses of getting the business started, ... Read Full Answer >>
Related Articles
  1. Entrepreneurship

    10 Tax Benefits For The Self-Employed

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

    Surviving The IRS Audit

    Keeping thorough records and knowing the penalties make this experience easier than you'd expect.
  3. Taxes

    Get A 6-Month Tax Extension

    Discover how to get some extra time from the IRS, without paying for the privilege.
  4. Taxes

    Don't Put Off Your Year-End Tax Plan

    From sales tax deductions to credit reports, check out what items should be on your financial checklist.
  5. Taxes

    Do Tax Cuts Stimulate The Economy?

    Learn the logic behind the belief that reducing government income benefits everyone.
  6. Taxes

    Top 9 Solutions To An Unexpected Tax Bill

    Finding out you owe when you expected a refund is a nasty shock. Find out how to cope.
  7. Taxes

    3 Common Tax Questions Answered

    We clarify some rules that often puzzle taxpayers.
  8. Taxes

    Give Your Taxes Some Credit

    A few tax credits can greatly increase the amount of money you get back on your return.
  9. Professionals

    Financial History: The Rise Of Modern Accounting

    Find out how these two have grown hand-in-hand throughout our modern history.
  10. Retirement

    Cut Your Tax Bill

    Paying your bills early or giving an extra donation now can help you come tax time.

You May Also Like

Hot Definitions
  1. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  2. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  3. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  4. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  5. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  6. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!