What are the Self Employment Taxes?
Self-employment taxes refer to the Social Security and Medicare taxes that are paid by employees and business owners. The amounts are 12.4% for Social Security and 2.9% for Medicare. If you are an employee of a business, half of these taxes (7.65%) are paid by you out of your wages, and the other half (7.65%) is covered by the business.
If you are self-employed, you owe taxes for both halves (all 15.3%), but you do get a tax deduction for the employer portion of the tax.
With an S-corporation, you only pay self-employment taxes on your reasonable compensation taken as payroll. This means you save tax on any amount of profit from the business that isn’t taken as payroll.
If you are self-employed, you owe taxes for both halves (all 15.3%), but you do get a tax deduction for the employer portion of the tax.
With an S-corporation, you only pay self-employment taxes on your reasonable compensation taken as payroll. This means you save tax on any amount of profit from the business that isn’t taken as payroll.