Yes, in so many ways it is taxing and especially when you consider the self-employment tax. Just the name sounds wrong, “I am being taxed just because I am self-employed?” Kind of. Let’s take a look at this tax and understand exactly what it is.
When you are an employee, your employer withholds Social Security (FICA for us old-timers but officially OASDI – Old Age, Survivors, and Disability Income) from your paycheck at a rate of 6.2% of your taxable wages up to the limit. This is to pay for your social security benefit at retirement or your disability income benefit if you become disabled and have sufficient credits to qualify. This applies to income up to $118,500 in 2016 (no change from 2015.) That’s another reason to up your income above that $118,500 level!
To keep reading, head to my blog at Working On Your Now.
To your financial (and tax) success!