What is the amount of the self-employment tax (SECA) and how does it compare to FICA taxes?

What is the amount of the self-employment tax (SECA) and how does it compare to FICA taxes?

Answer:

The self-employment tax (SECA) is 15.3 per cent of net earnings, which was proposed to be double the FICA tax paid by the employees. The specified resulting higher rate for self-employed individuals is because the self-employed pay both the employer and employee shares of Social Security and Medicare taxes.

In other words, from the details of the diagram stated as follows, 15. 3 per cent SECA tax is made up of 12. 4% to Social Security and 2. 9% for Medicare. Unlike customers who are direct patient bearers of this cost, employees contribute only half of this through their FICA taxes of 7. 65% each while the employers meet the other half. For instance, if the employee’s gross earnings are $50,000, he or she would pay $3,825 in FICA taxes as would the employer. Whereas, a SECA tax filer who owns a sole proprietorship business grossing $100,000 and claiming $50,000 net profit would be expected to pay the complete $7,650. On the other hand, SECA taxes paid by a self-employed individual can be reduced by one-half and deducted from income taxes reducing this burden slightly. Similar to FICA taxes, there is a wage base limit for the portion of SECA taxes that is attributed to Social Security (for 2023 this is $160,200), while there is no limit on the Medicare part. Also, for single filers, when gross income exceeds $200,000, they pay an additional 0. 9% Medicare tax. Though calculating the higher SECA rate can sometimes be difficult for the self-employed, they are guaranteed to contribute equally to these crucial social schemes as the employees under conventional working circumstances.