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Social Security & Medicare Questions Q: I am 63 and plan to start a housekeeping service since Social Security alone is not enough for me to live on. If I earn over $10,080 a year my Social Security benefits will be reduced $1.00 for every $2.00 over the $10,080. I've also heard that I will have to pay more in Social Security taxes. Can this be right? A: Yes. Self-employed people pay twice as much in Social Security taxes as other employees because you pay both the employee's portion and the employer's. The self-employment tax rate is 15.3% of your net profit up to $72,600. If your net earnings exceed $72,600, you will no longer have to pay Social Security taxes, but you must continue to pay the Medicare portion of the Social Security tax (2.9%) on the remainder. Most self-employed business owners must estimate their earnings and make quarterly payments. Extra earnings may also trigger yet another tax. If you exceed certain income limits ($25,000 single, or $32,000 joint in 1998) you may have to pay taxes on 50%-85% of any Social Security benefits you do receive. If this sounds like a triple tax whammy, it is. Please charge your lucky customers enough to pay your taxes! This article first appeared in Volume 4, Issue 8 of "The Social Security and Medicare Advisor" newsletter (July/August/1999). To receive future editions of "The Advisor" in its special, free e-mail version, please click here. | ||||||||
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