The self-employment tax rate is 15.3%. What is included in self-employment tax?

Question

FUTA and SUTA tax on net income from self-employment.
Social security tax and FUTA tax on net income from self-employment.
Social security tax and medicare tax on gross income from self-employment.
Social security tax and medicare tax on net income from self-employment.

Answer 1

The self-employment tax rate of 15.3% comprises two components:

1. Social Security tax - 12.4% (applied to net earnings up to a certain limit).
2. Medicare tax - 2.9% (applied to all net earnings, with an additional 0.9% for high earners).

The self-employment tax is based on net income from self-employment, not gross income.

Thus, the correct answer is:

Social security tax and Medicare tax on net income from self-employment.