Self-employed individuals are required to pay the entire 15.3% of SECA (Self-employed Contributions Act) taxes. As you now know, SE tax is made up of Social Security tax and Medicare tax. 12.4% of your SECA payment goes toward Social Security, with the second 2.9% going to fund Medicare.
If you've been giving guitar lessons part-time and making deliveries for Grubhub
to make $80,000 a year, you'll need to pay the IRS 15.3% of your income as SE taxes. That means you'll owe $12,240, with $9,920 going toward Social Security.
There is a limit on the Social Security part of SE tax, which changes yearly. In 2021, it was $142,800. Unless you make more than that in a year, you have to pay the full 12.4%, which means you're stuck paying that $9,920.
On the Medicare part, there is no limit. Every self-employed person is required to pay 2.9%, no matter what they make. So you'll need to pay $2,320 on your $80,000.
It may seem unfair that self-employed people are responsible for both portions of SE tax, while employees of companies have half of it paid by their employer, but the IRS offers a workaround. As a self-employed person, you can deduct the employer portion of the self employment taxes from your income tax as a business expense.