Self-Employment Tax in California: What You Need to Know

Self-employment tax is a crucial consideration for freelancers, independent contractors, and small business owners in California. This tax encompasses both Social Security and Medicare taxes, which are typically withheld from employees' paychecks but must be paid directly by the self-employed. As of 2024, the self-employment tax rate is 15.3%, divided into 12.4% for Social Security and 2.9% for Medicare. However, Social Security taxes are only applicable up to a certain income threshold, which for 2024 is $168,600. Income above this threshold is not subject to the Social Security portion of the self-employment tax. Additionally, high earners may be subject to an additional 0.9% Medicare tax if their income exceeds $200,000 (or $250,000 for married couples filing jointly). It's essential for self-employed individuals in California to account for these taxes when budgeting for their business expenses. Planning ahead and keeping accurate records can help avoid surprises at tax time and ensure compliance with federal tax regulations.