Not affiliated with the US Social Security Administration

Social Security Taxes on Self-Employment Income

Excerpted from "Social Security Handbook". See the up-to-date, official Social Security Handbook at ssa.gov.

1415. Social Security Taxes on Self-Employment Income

1415.1 What are the tax rates on self-employment income?

Social Security taxes are paid on self-employment income up to the maximum amount creditable for the year. Medicare taxes are paid on all self-employment income, as there is no yearly maximum. (See §1201.) The Social Security and Medicare tax rates on self-employment income are shown in the following chart:


Social Security and Medicare Tax Rates (Self-Employment)

Taxable year

Retirement, survivors, and disability insurance rate

Hospital insurance rate

Combined rate

1985

11.40%

2.70%

14.10%

1986-1987

11.40%

2.90%

14.30%

1988-1989

12.12%

2.90%

15.02%

1990 and later

12.40%

2.90%

15.30%

1415.2 What tax credits are allowed for self-employed persons?

If you were self-employed in 1984-1989, you were allowed credit against your Social Security and Medicare tax liability for those years in the following percentages:


Self-Employed Tax Credits

Taxable Year

Percentage Rate

1984

2.7%

1985

2.3%

1986-1989

2.0%

After 1989, the credit was replaced with special deduction provisions designed to treat the self-employed like employees and employers are treated for Social Security and income tax purposes.

Last Revised: March, 2001


Sponsored Links

Recent Content

Seven Social Security Myths

1. Social Security will cover my income needs

2. It's better to take Social Security benefits early

3. I'll receive full benefits at 65

4. Once I start benefits, I can’t work anymore

5. I won't pay taxes on Social Security

6. Once I start Social Security, I have to continue receiving it

7. My divorce will reduce my benefits

Common Mistakes About Social Security

A recent poll found about half of respondents made mistakes on the following :

1. Retirement benefits will not be reduced if I claim at age 65 => FALSE. Full retirement age is rising.

2. A spouse can receive Social Security even if they have no earnings history => TRUE

3. If my spouse dies, that will have no effect on my Social Security payment => FALSE

4. Social Security benefits depend only on my earnings history, not when I claim => FALSE

Four Common Social Security Claiming Mistakes

1. Not knowing your full retirement age (FRA). 'Full benefit' retirement age is rising beyond age 65 to age 67.

2. Not knowing you can file for benefits three months in advance of receiving income

3. Forgetting Social Security benefits can be subject to income tax.

4. Thinking early filers can later receive 'full benefits'. If filing early, your benefits are permanently reduced.


Sponsored Links


Sponsored Links

Not affiliated with the US Social Security Administration