What is the current self-employment tax rate and what portion is deductible?

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Multiple Choice

What is the current self-employment tax rate and what portion is deductible?

Self-employment tax covers both the employee and employer portions of Social Security and Medicare for people who work for themselves. The total rate is 15.3%, made up of 12.4% for Social Security and 2.9% for Medicare. Social Security applies only up to its wage base, while Medicare has no cap, so the tax structure reflects those limits. When you figure the tax, you use 92.35% of your net self-employment earnings to compute the tax, then apply 15.3%. You can deduct one-half of the self-employment tax as an adjustment to income on your federal return, which lowers your adjusted gross income. This is why the statement describing 15.3% total with one-half deductible is the best fit: it accurately states the rate and the deductible portion.

Self-employment tax covers both the employee and employer portions of Social Security and Medicare for people who work for themselves. The total rate is 15.3%, made up of 12.4% for Social Security and 2.9% for Medicare. Social Security applies only up to its wage base, while Medicare has no cap, so the tax structure reflects those limits. When you figure the tax, you use 92.35% of your net self-employment earnings to compute the tax, then apply 15.3%. You can deduct one-half of the self-employment tax as an adjustment to income on your federal return, which lowers your adjusted gross income. This is why the statement describing 15.3% total with one-half deductible is the best fit: it accurately states the rate and the deductible portion.

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