Tax Responsibilities for Self-Employed Individuals - Self-employed individuals are responsible for paying taxes that would typically be handled by an employer, including Social Security and Medicare taxes [2][3] - The IRS mandates that once self-employment income exceeds $400, individuals must pay a self-employment tax of 15.3% on their net earnings, which is divided into 12.4% for Social Security and 2.9% for Medicare [4][6] - The taxable amount is calculated on 92.35% of the profit, providing a slight reduction in the taxable base [4] Tax Calculation and Deductions - In addition to self-employment tax, self-employed individuals are also liable for regular income tax, which can lead to a significant overall tax burden [5] - A deduction of half of the self-employment tax is allowed when calculating income tax, which can alleviate some of the financial impact [5] Payment Schedule and Penalties - Tax payments for self-employed individuals are due quarterly, and failure to make these payments can result in penalties from the IRS [6]

Core Insights - Social Security serves as a crucial financial support system for American retirees, providing stability during retirement years [1] Taxation of Social Security Benefits - Social Security benefits are considered income and may be subject to taxation, although most states do not impose taxes on these benefits [2] - Nine states currently do not tax Social Security benefits: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia [5] - Some states are eliminating their Social Security tax, with West Virginia set to completely remove it starting in tax year 2026 [6] Federal Tax Rules - Federal tax regulations apply universally, meaning that even in states without a Social Security tax, federal taxes may still apply [7] - The IRS calculates the taxable portion of Social Security benefits based on combined income, which includes adjusted gross income (AGI), half of annual Social Security benefits, and any nontaxable interest [8] - Taxable income thresholds vary by filing status, with up to 50% of benefits taxable for singles with a combined income of $25,000 to $34,000, and up to 85% for those earning more than $34,000 [9]

Core Insights - Changes to Social Security tax rules are set to take effect in 2026, potentially providing new federal tax breaks for beneficiaries and altering state-level taxation on benefits [1][6]. Federal Taxation - Social Security income is generally taxed at the federal level, with up to 85% of benefits taxable based on household income. Individuals earning less than $25,000 and couples earning under $32,000 are exempt from federal taxes on their benefits [3]. State Taxation - Currently, eight states impose taxes on Social Security income, while 41 states do not. Notably, West Virginia will cease taxing Social Security benefits in 2026, reducing the number of states that tax these benefits to seven [5][6]. Senior Tax Deductions - Under President Trump's One Big Beautiful Bill Act, seniors aged 65 and older can claim an additional $6,000 on top of their standard deduction, effective through 2028. This allows older Americans to potentially write off up to $23,750 for individual filers and $46,700 for joint filers [4][6]. Variability in State Tax Rules - The amount beneficiaries pay in state taxes varies significantly based on local laws and household income. Some states, like Connecticut and Minnesota, tax Social Security, but often provide exemptions for lower-income retirees. Colorado allows certain seniors to deduct federal Social Security taxes from their state contributions [7].