What is the Social Security tax rate for an individual who is self-employed?

The correct choice is based on the structure of Social Security taxation for self-employed individuals. Self-employed individuals are subject to the self-employment tax, which covers both Social Security and Medicare taxes.

The tax rate for Social Security is set at 12.4% on earnings up to a specified annual limit, known as the Social Security wage base. However, when self-employed individuals calculate their tax, they must account for both the employee and employer portions of this tax. Therefore, the total rate for self-employed individuals which encompasses both Social Security and Medicare components is effectively higher than the 12.4% on its own. It sums to 15.3%, broken down as follows:

• 12.4% for Social Security

• 2.9% for Medicare

The total of these two components makes up the 15.3% self-employment tax, but specifically regarding the Social Security portion alone, the rate stands at 12.4%. This distinction is crucial in understanding the total tax burden for self-employed individuals under the Social Security system. Other choices do not reflect the accurate Social Security tax rate applicable to self-employed individuals.