What the self-employed need to know about employment taxes

Self-employed? You must pay FICA taxes on your self-employment income. The 12.4% Social Security tax applies to up to $118,500 of earned income for 2016. There’s no limit on the 2.9% Medicare tax. Normally these taxes are split equally between employee and employer, but you must pay both portions on self-employment income. Fortunately, you can deduct the employer portion. Also beware of the additional 0.9% Medicare tax. It applies to FICA wages and net self-employment income exceeding $200,000 per year ($250,000 for joint filers and $125,000 for separate filers).