Which tax component for self-employed individuals is 12.4%?

Which tax component for self-employed individuals is 12.4%?

• A. 2.9%
• B. 15.3%
• C. Social Security tax for self-employed
• D. Net pay

Answer: (C)

Self-employed individuals pay a self-employment tax that covers both Social Security and Medicare. The portion dedicated to Social Security is 12.4% of net earnings up to the Social Security wage base. Medicare is 2.9% with no wage base limit, and together they total 15.3% on earnings up to the wage base (with possible additional Medicare tax above certain income levels). The option that matches 12.4% is the Social Security tax for self-employed. The other numbers refer to Medicare (2.9%), the combined rate (15.3%), or take-home pay, which isn’t a tax rate.

Self-employed individuals pay a self-employment tax that covers both Social Security and Medicare. The portion dedicated to Social Security is 12.4% of net earnings up to the Social Security wage base. Medicare is 2.9% with no wage base limit, and together they total 15.3% on earnings up to the wage base (with possible additional Medicare tax above certain income levels). The option that matches 12.4% is the Social Security tax for self-employed. The other numbers refer to Medicare (2.9%), the combined rate (15.3%), or take-home pay, which isn’t a tax rate.