If part one in this series didn't convince you of the financial merits of the S-Corporation, let's outline some recent changes to tax law:
For 2022, lawmakers levy the self-employment tax at the painfully high rate of 15.3 percent on the first $147,000 of your net self-employment income:
Above the $147,000 Social Security tax ceiling, the Medicare tax component of the self-employment tax continues at a 2.9 percent rate before increasing to 3.8 percent at higher levels of net self-employment income, up to infinity, thanks to the 0.9 percent additional Medicare tax.
Say your self-employed Schedule C income for 2022 will be $200,000. After multiplying the $200,000 x 92.35 percent on your Schedule SE, you find that your 2022 self-employment tax bill will be a whopping $23,584.
That’s a lot of cash down the chute! The Social Security Administration forecasts that the Social Security tax component of the self-employment tax will quickly get much worse.
Have you reached the self-employment tax tipping point? Click here to read part one in this series, where we show you how to cut employment taxes with an S-Corporation.
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