Self Employed Social Security and Medicare Taxes: Key Facts
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Originally Posted On: https://taxsaversonline.com/self-employed-social-security-and-medicare-taxes/
Are you self employed or small business owner? Do you ever wonder if are paying your Social Security or Medicare taxes? Lets learn more about “Self Employed Social Security and Medicare Taxes” keep reading
Self Employed Social Security and Medicare taxes are sometimes called self employment taxes. These taxes apply on your earned income from self employment.
For example if you are a plumber and work for your self as a sole proprietor you will pay 15.3% of your net income in self employment taxes.
Self Employed Social Security Taxes
When you work for an employer, you pay half of your social security taxes(6.2%) and your employer with often pay the other half(6.2%). When you work for your self you have to pay both sides i.e. 12.4%
Self employed Self Employed Social Security Tax Rate 2022 is 12.4% . It only applies up to max amount of $147,000. So max Social security amount paid by a self employed person is $18228(12.4% times 147.000) in 2022.
Social Security tax is used to pay for safety net and for retirement benefits for self employed and employed taxpayers. Learn more about Self employed social security taxes by visiting IRS website here
Medicare Taxes for Self Employed
Medicare Tax Rate for Self Employed 2022 is 2.9 Percent of the net income. If you work for an employer, your employer pays 1.45 percent and you pay 1.45 percent. As self employed you have to pay both sides(1.45% plus 1.45%= 2.9%)
Medicare Tax Rate for Self employed is 2.9% of the net self employment income.
Medicare taxes are used to take care of taxpayers health typically after retirement. This money is collected from self employed and employed individuals and pooled together that is then used to cover medical expenses for people after retirement.
Is Self Employment Tax Social Security?
Yes. Portion of Self employment is social security and portion is Medicare.
12.4% of the Self employment tax(15.3%) is social security and remaining 2,9% is Medicare taxes.
This money is put aside for your retirement and safety net in case you become permanently disabled.
Is Social Security Taxable for Self Employed?
If your filing status is Single and your Income is between $25,000 to $34000, you can pay tax on up to 50% of the income you receive from Social Security.
If your income is above 34000 then you may end up paying tax on up to 85% of the income from Social Security.
If your filing Status is Married filing jointly and your income is between 32000 to 44000 then you may end up paying tax on up to 50% of the income from social security.
If your income is above $44000 then you may end up paying tax on up to 85% of your social security income.
Do Self Employed get Social Security Disability?
Yes. If you have paid into social security for years, you will be eligible for social security disability.
Here is Social Security Guide that explains this in detail. Click here to read article on social security website.