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.
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.
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
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: