The self-employment tax rate is 15.3%. This covers Social Security and Medicare, the same payroll taxes that get withheld from a traditional employee’s paycheck. The difference is that employees split these taxes with their employer, each paying half. When you’re self-employed, you pay both halves yourself.
How the 15.3% Breaks Down
The 15.3% self-employment tax has two components. The first is 12.4% for Social Security, which funds retirement, survivor, and disability benefits. The second is 2.9% for Medicare, which funds hospital insurance. If you’re a W-2 employee, you only see 6.2% and 1.45% deducted from your paycheck because your employer pays the other half. As a self-employed person, you cover the full amount.
To put that in dollar terms: on $80,000 of net self-employment income, the self-employment tax alone comes to about $12,240, before any deductions. That’s separate from your regular federal and state income taxes.
The Social Security Earnings Cap
The 12.4% Social Security portion only applies up to a certain income level, known as the wage base. For 2026, that cap is $184,500. Any net self-employment income above that amount is not subject to the 12.4% Social Security tax. However, the 2.9% Medicare tax has no cap and applies to every dollar of net self-employment earnings, no matter how high your income goes.
So if your net self-employment income is $250,000, you’d pay 12.4% on the first $184,500 and 2.9% on the full $250,000.
The Additional Medicare Tax for Higher Earners
High earners face an extra 0.9% Medicare tax on self-employment income above certain thresholds. Those thresholds depend on your filing status:
- Single or head of household: $200,000
- Married filing jointly: $250,000
- Married filing separately: $125,000
This additional tax brings the Medicare portion from 2.9% to 3.8% on income above the threshold. Unlike the base self-employment tax, there’s no deduction available for this surcharge. If you’re single and earning $300,000 in net self-employment income, the extra 0.9% applies to the $100,000 above the $200,000 threshold, adding $900 to your tax bill. Note that if you also have W-2 wages, those count toward the threshold too.
When You Owe Self-Employment Tax
You owe self-employment tax once your net earnings from self-employment reach $400 or more in a tax year. Net earnings means your total self-employment revenue minus your business expenses. This applies whether you freelance, run a sole proprietorship, operate a single-member LLC, or work as an independent contractor. It doesn’t matter whether you receive 1099 forms or not; the obligation is based on the income itself.
How Net Earnings Are Calculated
Before the 15.3% rate is applied, the IRS lets you reduce your net self-employment income by 7.65%. You multiply your net profit by 92.35% (100% minus 7.65%), and the result is the amount subject to self-employment tax. This adjustment exists because traditional employers don’t pay payroll taxes on the employer’s share of the tax, so this reduction puts self-employed people on roughly equal footing.
For example, if your Schedule C shows $100,000 in net profit, you’d multiply that by 0.9235 to get $92,350. The 15.3% rate applies to that $92,350, giving you a self-employment tax of about $14,130.
The Deduction That Offsets Part of the Cost
You can deduct the employer-equivalent portion of your self-employment tax when calculating your adjusted gross income. That’s half of the total self-employment tax you paid. This deduction goes on the front page of your tax return (an “above the line” deduction), so you get it whether or not you itemize.
This deduction doesn’t reduce your self-employment tax itself. It reduces your taxable income for regular income tax purposes. In the example above, if your self-employment tax is $14,130, you’d deduct roughly $7,065 from your adjusted gross income. Depending on your tax bracket, that could save you $1,500 to $2,600 or more on your income taxes.
Paying Self-Employment Tax Throughout the Year
Unlike employees who have taxes withheld from each paycheck, self-employed people are generally required to make quarterly estimated tax payments. These are due in April, June, September, and January of the following year. Your estimated payments should cover both your income tax and your self-employment tax. If you underpay by too much, the IRS charges an underpayment penalty, which functions like interest on the amount you should have sent in earlier.
You calculate your self-employment tax using Schedule SE, which you file alongside your Form 1040. If you also have W-2 wages from an employer, those wages count first toward the Social Security wage base, which can reduce the amount of self-employment income subject to the 12.4% Social Security portion.