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The self-employment tax is comprised of two taxes: the Social Security tax and the Medicare tax (also known as the FICA tax). As of the tax year 2023, the FICA tax rate is 15.3% — that’s 12.4% ...
With tax season 2010 already in full swing, it's easy to overlook some important tax changes for 2011. Here's some of what you can look forward to with respect to personal income taxes during the
The 2010 Tax Relief Act reduced the self-employment tax by 2% for self-employment income earned in calendar year 2011, [7] for a total of 13.3%. This rate will continue for income earned in calendar year 2012, due to the Temporary Payroll Tax Cut Continuation Act of 2011 . [ 8 ]
Note that although self-employed individuals pay 12.4%, this is mitigated two ways. First, half of the amount of the tax is reduced from salary before figuring the tax (you don't pay Social Security tax on the tax your employer pays for you.) Second, the "employer" half is an adjustment to income on the front page of Form 1040.
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In addition to the Federal income tax, John probably pays state income tax, Social Security tax, and Medicare tax. The Social Security tax in 2007 for John is 6.2% on the first $97,500 of earned income (wages), or a maximum of $6,045. There are no exclusions from earned income for Social Security so John pays the maximum of $6,045.