Do You Pay Self Employment Tax on a IRA Withdrawal?

Individual retirement accounts offer tax-sheltered savings for retirement. When you take a withdrawal, you will receive a Form 1099-R that will document how much of your withdrawal is subject to income taxes.

Self-Employment Taxes

Self-employment taxes do not apply to IRA withdrawals because money taken from an IRA counts as unearned income, according to the IRS. Only earned income is subject to self-employment taxes.

Considerations

Withdrawals from a tax-deferred IRA must be included in your taxable income when filing your income taxes. Qualified distributions from Roth IRAs are tax-free.

Features

The self-employment tax includes a medicare tax and a Social Security tax. As of 2010, the Medicare tax rate equals 2.9 percent and the Social Security tax equals 12.4 percent.

References

• IRS: Publication 590, Individual Retirement Arrangements
• Social Security Administration: FICA and SECA Tax Rates
• IRS: Self-Employment Tax
• IRS: What is Earned Income?