What Is Self-Employment Tax?
An employee and their employer each pay 7.65% of wages toward Social Security and Medicare. When you work for yourself, you are both, so you pay both halves: 15.3%, made up of 12.4% for Social Security and 2.9% for Medicare. That combined tax is self-employment (SE) tax, and you figure it on Schedule SE with your Form 1040.
It is charged on your net profit, not your revenue, and it applies from the first dollar of profit. Unlike income tax, there is no standard deduction to absorb it. Someone whose profit is too low to owe any income tax can still owe SE tax. The one floor is small: if your net earnings come to less than $400, you owe none.
SE tax is federal. The same profit is also income for your state income tax, which the Income Tax Calculator estimates.
How the Calculation Works
- Start with net profit: revenue minus business expenses, usually the bottom line of Schedule C.
- Multiply by 92.35% to get net earnings from self-employment. This removes 7.65%, the same share an employer would pay on top of an employee's wages.
- Stop if the result is under $400. No SE tax is due.
- Apply 12.4% for Social Security to net earnings, up to the year's wage base less any W-2 wages.
- Apply 2.9% for Medicare to all net earnings.
- Deduct half the total on Schedule 1 when you figure your income tax.
With $80,000 of profit in 2026 and no other job, net earnings are $73,880. Social Security takes $9,161 and Medicare $2,143, for $11,304 of SE tax, about 14.1% of profit. Half of it, $5,652, comes off your income before income tax is figured.
The Social Security Wage Base
The 12.4% Social Security part stops at the annual wage base: $184,500 for 2026, up from $176,100 in 2025. Wages from a job count toward that limit first, and your self-employment earnings use whatever room is left. Add the same $80,000 of profit to a $170,000 salary and only $14,500 of it is charged Social Security, so the SE tax falls to $3,941. The 2.9% Medicare part has no cap. The combined earnings also pass $200,000, which adds $395 of Additional Medicare Tax.
Additional Medicare Tax
A further 0.9% applies to earnings above $200,000 for single filers and heads of household, $250,000 for joint filers, and $125,000 for married filing separately. These thresholds are set in the law and are not adjusted for inflation. For self-employment income, the tax is charged on net earnings (the 92.35% figure), and any wages you had reduce the threshold first. It is figured on Form 8959, not Schedule SE, and it is not part of the deductible half.
The Deductible Half
You deduct half of your SE tax on Schedule 1 when you figure adjusted gross income. This matches how an employee is treated: the employer's half of payroll tax is never counted as the employee's income. The deduction lowers your income tax, not the SE tax itself.
Quarterly Estimated Payments
No employer withholds tax for you, so the IRS expects you to pay during the year if you will owe at least $1,000 after any withholding and refundable credits. Payments cover SE tax and income tax together, and you can make them with Form 1040-ES or IRS Direct Pay.
| Payment | Income Period | Due Date |
|---|---|---|
| 1st | Jan 1 – Mar 31 | April 15 |
| 2nd | Apr 1 – May 31 | June 15 |
| 3rd | Jun 1 – Aug 31 | September 15 |
| 4th | Sep 1 – Dec 31 | January 15 (following year) |
These dates hold for tax year 2026. When a date falls on a weekend or federal holiday, it moves to the next business day, which is why the second 2025 payment was due June 16.
You avoid an underpayment penalty if your payments and withholding reach at least 90% of this year's tax or 100% of last year's. The second figure rises to 110% if last year's adjusted gross income was over $150,000 ($75,000 if married filing separately).
Frequently Asked Questions
Does SE tax apply to all self-employment income?
It applies to net profit from a trade or business you run as a sole proprietor or a partner, including freelance, gig and consulting work. Some income is excluded: rent from real estate (unless you are a dealer or provide substantial services to tenants), a limited partner's share of partnership income other than guaranteed payments for services, and S corporation distributions. If your net earnings after the 92.35% adjustment are under $400, no SE tax is due.
Can I reduce SE tax by paying myself through an S corporation?
Often, yes. An S corporation owner who works in the business must take a reasonable salary, which carries Social Security and Medicare through payroll. Profit paid out as distributions beyond that salary is not subject to either tax. The IRS looks at whether the salary is reasonable for the work done, and running payroll, a separate corporate return and any state fees cost money, so the savings usually only matter at higher profits.
Which deductions lower SE tax?
Only business expenses that reduce your Schedule C net profit: ordinary and necessary costs such as supplies, software, business mileage, a qualifying home office, and contractors. Those lower both income tax and SE tax. Some deductions available to the self-employed do not: health insurance premiums for yourself and your family, SEP or solo 401(k) contributions for yourself, and the deductible half of SE tax are taken on Schedule 1, so they reduce income tax but not SE tax.
Do I pay SE tax if I also have a W-2 job?
Yes, on your self-employment profit. The wages affect only the Social Security part: wages count toward the $184,500 wage base for 2026 first, and SE earnings are charged the 12.4% only on whatever room is left. The 2.9% Medicare part applies to all your net earnings regardless of wages.