April 14, 2018 at 2:00 pm #184197
I’m a new freelance graphic designer and have always been warned about taxes being high. I just read an article on here and it said it could be up to 16% (considering the double Medicare and Social Security tax), but for me it’s almost 30% this year! I’ve talked to friends who pay almost 40%!! I’d love to get down to the “high” tax self employed people supposedly pay. What am I missing here? Is it just because I’m single with no kids but my 2 cats?
MayaApril 14, 2018 at 2:04 pm #184200
Dock David TreeceModerator
Thanks for the question! It’s important to remember that self-employment tax doesn’t replace income tax – you have to pay them both. This can bring your total income tax liability up to the levels you mentioned, depending on your individual tax bracket.
When you’re employed as a W-2 employee at a company, your employer pays have of your FICA tax (about 7.5%) and you pay half. When you work for yourself, you have to pay the full FICA tax (about 15%) in addition to income taxes. Self-employment tax isn’t actually a new tax – it’s just that you’re having to pay the full tax yourself.
Hope this helps. If you have other individual income tax questions, we would suggest speaking with a licensed accountant.
Have a great day,