Higher self-employment taxes coming in 2017
Did you know the national
average wage index went up? You might have missed the news, but it's likely you
will notice one impact: higher self-employment taxes.
How are the two related? The
index is used to calculate the social security wage base, which is the amount
of income subject to the 12.4% social security portion of the self-employment
tax. When the index goes up, the wage base does too, and more of your income is
taxed.
The wage base does not affect
the 2.9% Medicare portion of the self-employment tax. Medicare tax is assessed
on all net income from self-employment, including amounts above the base. The
0.9% Additional Medicare Tax is not affected either. That tax applies to your
compensation in excess of $250,000 when you're married filing jointly ($200,000
when you're single).
For 2016, the wage base was $118,500.
For 2017, the wage base will be $127,200. That means an additional $8,700 of
the net profit from your business is subject to social security tax in 2017. The
effect is an increase in the amount you pay, even though the total
self-employment tax rate of 15.3% remains unchanged.
Please contact us for more information.
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