Being your own boss comes with great rewards, but tax season can be a whole different story. This guide equips you with the knowledge to navigate the self-employed tax landscape in 2024.<\/p>\n\n\n\n
Don’t let taxes slow you down!<\/strong> This guide provides a solid foundation for self-employed tax management. Remember, tax laws can change, so stay updated and consult a professional for specific situations.<\/p>\n\n\n\n You pay the self-employed tax rate<\/strong> of 15.3% (as of 2022). It’s a combination of 12.4% for social security and 2.9% for medicare. If you’re employed by someone, usually that amount is split between both parties (the employee and the employer), so you wind up paying 7.65%. This is one of the reasons, we recommend forming an S Corp. An S Corp allows you to assign yourself a reasonable income vs the total net earnings of your business. <\/p>\n\n\n\n It’s less that it’s so high and more that the independently operating entrepreneur is in a tough spot. While someone employed pays half and their employer pays half. The entrepreneur is in a unique situation wherein they are both, the employer and the employed.<\/p>\n\n\n\n However, the other reason it’s so “high” is because you’re able to deduct many expenses. Health insurance, ordinary (and necessary) business expenses, not to mention part of your income if you’re an S Corp. It’s one of the reasons it’s important to have a plan<\/a> going into your business.<\/p>\n\n\n\n It’s a narrow bracket, but anyone who earns less than $400\/year are exempt from the SE tax. This is part of the reason why the nebulous but sticking<\/em> point of S Corps is in play, i.e. assigning yourself a “reasonable” salary.<\/p>\n\n\n\nFrequently Asked Questions<\/h3>\n\n\n\n
What tax do I pay if self-employed?<\/h4>\n\n\n\n
Why is self-employment tax so high?<\/h4>\n\n\n\n
Who is exempt from self-employment tax?<\/h4>\n\n\n\n