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Old 03-10-2008, 11:31 PM
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What is the Self-Employment Tax rate for self-employed businesses?

What is the tax rate that is assessed on self-employed individuals in 2008? Is this a flat rate or a graduated rate? Thank you!



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Old 03-11-2008, 11:37 AM
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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.

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