Self-employment tax is a type of tax paid by individuals who are self-employed, such as freelancers, contractors, and business owners. It is similar to the Social Security and Medicare taxes that are withheld from the paychecks of traditional employees, but self-employed individuals are responsible for paying both the employee and employer portions of these taxes. The self-employment tax rate is 15.3%, which is divided into 12.4% for Social Security and 2.9% for Medicare.
Self-employment tax is important because it helps to fund Social Security and Medicare benefits. These programs provide essential financial support to retirees, disabled individuals, and survivors. Self-employment tax also helps to ensure that self-employed individuals have access to the same social safety net as traditional employees.
