If you are self-employed, you must still pay social security taxes. When you work for someone else, they split this burden with you. It can be nice to have this taken care of by your employer; they simply withhold the tax from your paychecks. But when you are self-employed, it’s your responsibility to make sure you pay on it come tax time. Here are the answers to some questions you may have to understand better. 

Who pays self-employed 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 your retirement and an additional 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.

So, does this mean even the self-employed are entitled to social security benefits in retirement?

It most definitely does! When you hit retirement age, 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. One nice thing is that they’ll use your highest earning years, allowing you to receive the maximum amount you’re entitled to. 

How do you pay your self-employed social security tax?

You will need to complete a Schedule SE (Form 1040) at tax time. This form will determine how much Social Security and Medicare tax you owe. You may want to consider withholding a percentage of your earnings throughout the year; that way, you won’t be required to come up with a larger 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 in the Membership Benefits provided through AFE.

Paying into Social Security is essential for your retirement. It guarantees you will receive income in your retirement years. And basically, the more you work and the more money you’ve paid into it, the more you’ll receive.