Why is my blended tax rate 32%? I make around $40k, and that's the rate for people around $200k

[DylanBrennan]

Hello! I'm filing early, and my summary page said the blended tax rate for me was 32.1%. I make around $40,000 a year as an independent contractor, and this is my only job. I found the tax brackets, and this rate of 32.1% should be for someone making over five times what I make. From all the sources on the internet, it should be around 7-12%. 

Any help is appreciated, and I'll provide any details people want answered. 

[KeshaH]

The 32.1% blended relate your seeing includes your income tax and self employment tax combined. As an independent contractor, you pay both regular income tax PLUS self employment tax of 15.3% (which covers Social Security and Medicare taxes that normally an employer would split with you).

The 7-12% rate you see online usually only account for income tax and don't include self employment taxes which can significantly increase the overall tax rate for independent contractors.

[DylanBrennan]

That still leaves around 16%, which still seems high, but I appreciate the clarity! Helps me know where to look for any tax hang-ups

[DawnC]

Take a look at this article that explains the marginal and effective tax rates.   These ratios are more commonly used.  

Blended tax rate = tax liability / taxable income - this number is not used by anyone, but TurboTax.  

More detailed, the Blended Tax rate is:

• Tax liability (Including SE tax, capital gain and special taxes),
•  Divided by  ÷
• Taxable income (Total income minus deductions, but before credits).