Self-employment Tax Reduced 2% in 2011
In attempt to boost taxpayer income - and thus encourage spending - the new Tax Relief Act, signed by President Obama in December 2010, reduces withholding for employees. This reduction is an attempt to stimulate consumer spending and get the economy back on track.
In addition to this reduction in employee withholding, self-employment taxes (Social Security and Medicare) have also been reduced by 2%. Self-employed persons, who pay both halves of the Social Security tax through the self-employment tax, will pay a combined rate of 10.4% (the employer's 6.2% plus the employee's 4.2% rates), instead of the 12.4% rate in past years.
Self-employment tax is paid by business owners on their personal income tax returns. It is calculated on Schedule SE and is paid along with income taxes.
