The Social Security tax on self-employment income is 12.4% on income up to the Social Security Wage Base and the 2.9% Medicare tax on all income. One-half of the Social Security self-employment tax is an allowed deduction from Adjusted Gross Income (AGI) in the federal income tax calculation.
Enter self-employment income from Schedule C, Form 1040. Enter the net income after deductions, but before the initial deduction for the self-employment tax which Divorce Math calculates.
In calculating the Social Security self-employment tax, the first step is to allow a deduction of 7.65% of self-employment income (from Schedule C) to determine income subject to the self-employment tax. Income up to the wage base is taxed at 12.4%, while all income subject to the self-employment tax is taxed at 2.9% for the Medicare tax.
If a self-employed person has net Schedule C income of $110,000 (before the 7.65% deduction), a FICA tax of 12.4% would be paid on $97,500 and a 2.9% Medicare tax on all income after the 7.65% deduction. The income for the Medicare tax would be $110,000 less 7.65% or $101,585 and the combined Social Security tax would be $15,280.
However, if an individual also has a salaried job, then credit is given for Social Security taxes paid from the salaried job. Thus, an individual is never taxed on more than the Social Security Wage Base and the first tax is on salary.
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