Self-employment Tax
If you are self-employed, you pay self-employment tax (SECA) to the Social Security Administration for Social Security and Medicare, based on your net earnings from your business. You pay this tax at the same rate as employers and employees (15.3% total), up to the Social Security maximum for the current year. If your business earnings exceed the Social Security maximum, you continue to pay the Medicare tax.
If you also earn income from employment
The Social Security Administration considers the tax on your employment first, then your earnings from self-employment. If the total of both employment and self-employment exceeds the Social Security maximum, you continue to pay the Medicare portion (1.45%) on earnings from both employment and self-employment.
An Example
If you earn $150,000 from employment and $30,000 from self-employment, you would have to pay Social Security tax on your employment, up to $106,800. The additional $43,200 of employment earnings, and the $30,000 from self-employment, would not have the Social Security tax amount deducted. But, you would still be required to pay the Medicare tax on the full amount of your earnings from employment and self-employment.
For more information and examples, see this article on Self-Employment and Social Security Tax, from the Social Security Administration.
