What is the Self-Employment Tax rate for self-employed businesses?
For Tax Year 2007
Your Self-Employment Tax, known commonly as the S/E Tax is currently at 15.3%. There are 2 components making up this tax rate.
The first one is the Social Security Taxes or FICA that is imposed on the first $97,500 at 12.4%. For net income above 97,500 the income is not subject to S/E Taxes.
The second component is the Medicare taxes and there is no income limit on this amount. The tax rate here is 2.9% on the Net Self-Employment Income.
Thus, for taxpayers whose net self-employment income is less than 97,500, the effective S/E tax is at 15.30%. Remember, all this income is also subject to the regular tax rate.
The taxpayers is allowed a 50% deduction of S/E tax liability, and this deduction is taken as an adjustment to income without any limitations.