When you are self-employed, you must still pay social security taxes. Paying into your social security will set you up when it comes time for retirement. Not only do you want to avoid any legal ramifications for not paying social security tax, but the more you pay into it, the more comfortable you’ll find your retirement years to be.

Here’s a quick run-down of what you need to know when paying your social security tax during tax season.

Who pays social security taxes?

Everyone who works needs to pay into social security. And that includes those individuals who have earned $400 or more working.

How much is the social security tax for the self-employed?

Currently, the tax rate for the self-employed is 15.3%. You pay 12.4% of your net income towards retirement and 2.9% towards Medicare. Keep in mind that you still need to pay income tax as well. There is a benefit to this! The self-employed are entitled to some pretty nice tax breaks. You can write off home office expenses, items charged to conduct your business, and more. You’ll also be able to deduct half have your Social Security tax from your gross income.

Are self-employed individuals entitled to social security benefits when they retire?

Yes, they are. When you hit the retirement age, typically between the ages of 62-63, the Social Security Administration will determine how much you will receive. This calculation is done by averaging your monthly income during 35 years of work. The nice thing about this is that they’ll use your highest earning years, allowing you to receive the maximum amount you’re entitled to.

How do you pay social security tax?

You will need to complete a Schedule SE at tax time. This form will determine how much Social Security and Medicare tax you owe. Consider withholding a percentage of your earnings throughout the year; that way, you won’t be required to come up with a more significant lump sum at the end of the year. If you are uncomfortable doing this on your own, consider enlisting the help of a financial advisor. You can find one here, Membership Benefits , provided through AFE.

When you work for someone else, they help pay this tax for you. By withholding income from your pay, they will put it towards your social security and Medicare taxes. But as a self-employed individual, the responsibility to pay it is strictly on you. And remember, paying into social security is essential for your retirement. It guarantees you will receive income in your retirement years. The more you work and the more money you’ve paid into it, the more you’ll receive.