Self Employment Tax I mentioned on Monday that when you are self employed you have to pay self employment tax on the net profit of your self employment income. Self Employment Tax is how you pay into Social Security and Medicare, the difference is that youre not sharing this responsibility with an employer rather youre paying the full tax yourself. Heres how this breaks out: • the employees portion of the Social Security tax, which is 6.2% of the first $117,000 of net income • the employers portion of the Social Security tax, which is 6.2% of the first $117,000 of net income • the employees portion of the Medicare tax, which is 1.45% of all net income (no cap or limit on net income) • the employers portion of the Medicare tax, which is 1.45% of all net income (no cap or limit on net income) In other words, the self-employed persons self employment tax rate consists of the Social Security tax of 12.4% (6.2% + 6.2%) of the first $117,000 of net income plus the Medicare tax of 2.9% (1.45% + 1.45%) of every dollar of net income. There is also a Medicare surtax that applies to higher income taxpayers. If your self employment net income equals or exceeds $400 then you will be subject to this tax. If you have questions or want more information give me a call at 573-451-2229.
Posted on: Thu, 06 Nov 2014 15:09:17 +0000
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