2014 Social Security - Let the squeezing begin!
The Government increased the Social Security wage base 2.9% (from 113,700) citing an increase in wages paid to employees, but only raised Social Security Benefits 1.4%. Hmmm... I guess retired persons are not affected by the same increases in cost of living as the wage earners. Sounds like more money for the government and less for the AARP.
Before any deductions, Payroll taxes on $117,000 in Self Employed wages will be $17,784 (15.3%).
Here is the breakout:
In 2014, A self-employed person with at least $117,000 in net self-employment earnings will pay $14,508 for the Social Security part of the self-employment tax. Additionally, A self employed person pays 2.8% ($3,276) on those same $117,000 Once your wages go above $200k you pay additional Medicare tax (.9%) for all those wages.
For 2014, the self-employment tax imposed on self-employed people is:
(a) 12.4% OASDI on the first $117,000 of self-employment income, for a maximum tax of $14,508.00 (12.40% of $117,000); plus
(b) 2.90% Medicare tax on the first $200,000 of self-employment income ($250,000 of combined self-employment income on a joint return, $125,000 on a separate return
(c) 3.8% (2.90% regular Medicare tax + 0.9% additional Medicare tax) on all self-employment income in excess of $200,000 ($250,000 of combined self-employment income on a joint return, $125,000 for married taxpayers filing a separate return).
Although a SE person gets a deduction for the Employer portion of the SE tax, it is only worth a fraction of the tax (marginal tax rate x the employer portion of the payroll tax).