Self-employed individuals pay 12.4% of gross income (6.2%*2). This corresponds to which tax?

• A. Self-employed tax
• B. Social Security tax for self-employed
• C. Medicare tax for self employed
• D. Net pay

Answer: (B)

Self-employment tax covers Social Security and Medicare for someone who is self-employed, since you’re paying both the employee and employer portions. The 12.4% portion specifically represents the Social Security part (6.2% as if you were the employee plus 6.2% as the employer). Medicare tax is separate at 2.9%, and together the total self-employment tax is 15.3% on net earnings (though Social Security portion applies only up to the wage base). Net pay is take-home income, not a tax. So the 12.4% figure corresponds to the Social Security tax for self-employed.