Self-Employment Tax Law

Self-employment tax is a tax that individuals who work for themselves must pay to cover Social Security and Medicare taxes. Unlike traditional employees, who have these taxes withheld from their paychecks by employers, self-employed individuals must calculate and pay these taxes themselves. The self-employment tax rate is currently 15.3% on net earnings, allowing for a portion to be deducted when filing income taxes. This ensures that self-employed individuals contribute to social safety programs, similar to their employed counterparts. Understanding these obligations is crucial for managing finances and compliance with tax laws.