Self-employed individuals pay 2.9% of gross income (1.45%*2) for which tax?

Self-employed individuals pay 2.9% of gross income (1.45%*2) for which tax?

• A. Net pay
• B. Medicare tax for self-employed
• C. Social Security tax for self-employed
• D. Self-employed tax

Answer: (B)

When you’re self-employed, you pay a self-employment tax that covers Social Security and Medicare. The 2.9% figure is the Medicare portion, because Medicare tax is 1.45% paid by the employee and 1.45% paid by the employer, and as a self-employed person you both employee and employer roles, so you pay a total of 2.9% for Medicare. The full self-employment tax is 15.3% (12.4% for Social Security plus 2.9% for Medicare) up to the Social Security wage base, with Medicare continuing beyond that cap. So the best match is the Medicare tax for self-employed.

When you’re self-employed, you pay a self-employment tax that covers Social Security and Medicare. The 2.9% figure is the Medicare portion, because Medicare tax is 1.45% paid by the employee and 1.45% paid by the employer, and as a self-employed person you both employee and employer roles, so you pay a total of 2.9% for Medicare. The full self-employment tax is 15.3% (12.4% for Social Security plus 2.9% for Medicare) up to the Social Security wage base, with Medicare continuing beyond that cap. So the best match is the Medicare tax for self-employed.