What Is Self-Employment Tax?
When you work as an employee, your employer pays half of your Social Security and Medicare taxes — you pay the other half through payroll withholding. When you're self-employed, there's no employer, so you pay both halves yourself. That's self-employment (SE) tax: 15.3% total — 12.4% Social Security plus 2.9% Medicare.
SE tax is a federal tax only — no state has its own equivalent. However, your net SE income is still subject to state income tax as ordinary income, just like wages. This calculator covers the federal SE tax piece; use the Income Tax Calculator for your combined federal and state income tax estimate.
The good news: you only pay SE tax on 92.35% of your net earnings, not the full amount. This adjustment (1 − 7.65% = 92.35%) approximates the employer-side deduction that a regular employee's employer would get. It's built into the SE tax formula and applied automatically.
The SE Tax Calculation, Step by Step
- Start with net SE income — revenue minus allowable business expenses (Schedule C net profit).
- Multiply by 92.35% to get your SE tax base.
- Apply 12.4% Social Security to the SE base, up to the annual wage cap ($184,500 in 2026; $176,100 in 2025).
- Apply 2.9% Medicare to the full SE base — no cap.
- Add the two together for your total SE tax.
- Deduct half of SE tax from your gross income to arrive at AGI on Form 1040.
The Social Security Wage Cap
Social Security tax only applies up to the annual wage base — $184,500 in 2026 (up from $176,100 in 2025). Once your combined wages and SE income exceed this threshold, you stop paying the 12.4% SS portion on the excess. If you also had W-2 wages during the year, those count first toward the cap, reducing how much of your SE income is subject to the SS tax.
Additional Medicare Tax
High earners pay an extra 0.9% Medicare surtax on income above: $200,000 for single filers, $250,000 for married filing jointly, and $125,000 for married filing separately. Unlike the base SE tax, this additional tax applies to the full amount over the threshold — not just the 92.35% base. It's calculated on Schedule SE and reported on Form 1040.
The Deductible Half
You can deduct half of your SE tax as an above-the-line deduction on Form 1040, reducing your adjusted gross income (AGI). This mirrors the benefit employees get — their employer's share of FICA isn't included in their taxable wages. The deduction doesn't reduce the SE tax itself, but it lowers the income subject to federal and state income tax, which saves you money.
Quarterly Estimated Payments
The IRS requires estimated tax payments if you expect to owe at least $1,000 in tax for the year. Self-employed people typically make four payments per year using Form 1040-ES or IRS Direct Pay:
| Payment | Income Period | Due Date |
|---|---|---|
| Q1 | Jan 1 – Mar 31 | April 15 |
| Q2 | Apr 1 – May 31 | June 15 |
| Q3 | Jun 1 – Aug 31 | September 15 |
| Q4 | Sep 1 – Dec 31 | January 15 (following year) |
Dates above apply to tax year 2026. In tax year 2025, Q2 was due June 16 because June 15 fell on a Sunday; the IRS shifts a due date that falls on a weekend or federal holiday to the next business day.
Each quarterly payment should cover both your SE tax and your estimated income tax for that period. Underpaying can trigger a penalty, though the IRS waives it if you pay at least 100% of last year's tax liability (110% if your AGI exceeded $150,000).
Frequently Asked Questions
Does SE tax apply to all self-employment income?
It applies to net profit from a trade or business, including freelance work, consulting, and sole proprietorships. Certain income types are excluded — notably rental income (unless you're a real estate dealer), S-corp distributions (not wages), and passive partnership income. If you're unsure whether a specific income source is subject to SE tax, Schedule SE instructions or a tax professional can clarify.
Can I reduce SE tax by paying myself through an S-corp?
Yes — this is a common strategy. If you operate as an S-corp, you pay yourself a "reasonable salary" subject to FICA (split between you and the corp), but additional profit distributions are not subject to SE tax. The savings can be significant at higher income levels, though you'll need to weigh payroll costs, state fees, and accounting complexity against the tax benefit.
What counts as a business expense?
The IRS allows deductions for "ordinary and necessary" business expenses: home office, business vehicle use, equipment, software, health insurance premiums (self-employed), retirement plan contributions (SEP-IRA, Solo 401k), professional services, and more. These reduce your net SE income before SE tax is calculated, making them doubly valuable — they lower both income tax and SE tax.