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A self-employed person pays twice as much as an employee pays. However, because the employer pays a matching amount, the combined rate paid by the employer and the employee is equal to the self-employment tax. But there are special tax credits you can take when you file your tax return that are intended to lower your overall rate.

In 2007, the Social Security tax rate is 15.3 percent on self-employment income up to $97,500. For 2008 the tax rate is 15.3 percent on income up to $102,000. Although you do not pay self-employment tax on net earnings exceeding $97,500 (or $102,000), you must continue to pay the Medicare portion of the Social Security tax (2.9 percent) on the rest of your earnings. For more information, we recommend that you review the fact sheet, If You're Self-Employed.