While being your own boss might seem like a dream come true, being self-employed these days is a serious tax nightmare. In 2010, the self-employed of the middle class were saddled with a 40.3% income tax rate. But following last night's fiscal cliff debacle, the tax burden will now be even higher.
Why do the self-employed pay so much more in taxes? For starters, self-employed people have to pay double the FICA and Medicare expenses as other workers because payroll taxes typically paid by employers are swallowed by the self-employed.
With last night's so-called "deal," the self-employed middle class can expect an even higher tax burden in 2013. CNN contributor and former White House press secretary Ari Fleischer is tweeting out the warnings this morning:
If you're self-employed, bcause u pay both sides of the Medicare and Soc Sec tax, your new top Federal rate is above 50%.— Ari Fleischer (@AriFleischer) January 2, 2013
If you're self-employed and live in a high tax state (think NY and CA) your new combined federal/state top rate is about 60%.— Ari Fleischer (@AriFleischer) January 2, 2013