Self-employment Tax

Self-employment can be an incredibly rewarding career choice, but it also comes with unique financial responsibilities. One of the most crucial considerations for self-employed individuals is understanding and managing their tax obligations.

Self-employment tax refers to the Social Security and Medicare taxes that self-employed individuals must pay. Unlike traditional employees, self-employed workers are responsible for both the employer and employee portions of these taxes, which can add up quickly.

In 2023, the self-employment tax rate is 15.3%. To calculate your self-employment tax, you’ll need to determine your net earnings from self-employment and multiply that by the current tax rate. You may also be able to deduct certain business expenses from your net earnings to reduce your tax burden.

It’s important to stay on top of your self-employment taxes throughout the year to avoid surprises at tax time. Consider setting aside a portion of each payment to cover your tax obligations or working with an accountant to develop a tax plan that works for your business.

Overall, while self-employment tax may seem daunting, understanding and managing your obligations can help you stay financially secure and thrive in your career.