Tax Savings Tips: July 2022
Self-Employment Tax Basics If you own an unincorporated business, you likely pay at least three different federal taxes. In addition to federal income taxes, you must pay Social Security and Medicare taxes, also called the self-employment tax. Self-employment taxes are not insubstantial. Indeed, many business owners pay more in self-employment taxes than in income tax. The self-employment tax consists of · a 12.4 percent Social Security tax up to an annual income ceiling ($147,000 for 2022) and · a 2.9 percent Medicare tax on all self-employment income. These amount to a 15.3 percent tax, up to the $147,000 Social Security tax ceiling. If your self-employment income is more than $200,000 if you’re single or $250,000 if you’re married filing jointly, you must pay a 0.9 percent additional Medicare tax on self-employment income over the applicable threshold for a total 3.8 percent Medicare tax. You pay the self-employment tax if you earn