What self-employment tax is
When you work for an employer, Social Security and Medicare tax is split: you pay half through payroll withholding and your employer pays the other half. When you work for yourself, there is no employer, so you pay both halves. That combined bill is self-employment (SE) tax, and it is reported on Schedule SE with your Form 1040.
The rate is 15.3%, made of two parts:
- 12.4% Social Security — only on earnings up to the yearly wage base, which is $184,500 for 2026.
- 2.9% Medicare — on all of your net self-employment earnings, with no cap.
Self-employment tax is separate from income tax. The calculator above shows SE tax only; you will usually owe federal (and often state) income tax on the same profit as well.
How the calculation works
SE tax is not charged on your whole profit. You first multiply net profit by 92.35%. That adjustment removes the “employer half” an employee would never see on their own pay, so a freelancer and an employee with the same economic income are taxed on a comparable base.
- Start with net profit from self-employment (for most freelancers, Schedule C line 31).
- Multiply by 92.35% to get net earnings from self-employment.
- Apply 12.4% to the part that fits under the Social Security wage base (minus any W-2 wages you already had).
- Apply 2.9% to all of it.
- Add the 0.9% Additional Medicare Tax if your earnings pass the threshold for your filing status.
If your net earnings from self-employment are under $400 for the year, you generally do not owe SE tax.
$85,000 × 92.35% = $78,497.50 of net earnings.
Social Security: $78,497.50 × 12.4% = $9,733.69
Medicare: $78,497.50 × 2.9% = $2,276.43
Total SE tax ≈ $12,010 — about 14.1% of profit, or roughly $3,003 per quarter.
If you also have a W-2 job
The Social Security wage base is shared between your paycheck and your side business. Wages that already had Social Security withheld use up part of the $184,500 limit, so less of your self-employment income is hit by the 12.4% portion. Medicare still applies to every dollar.
Net earnings: $90,000 × 92.35% = $83,115.
Room left under the wage base: $184,500 − $120,000 = $64,500, so Social Security is $64,500 × 12.4% = $7,998.
Medicare: $83,115 × 2.9% = $2,410.
Additional Medicare: the $200,000 threshold is reduced by your $120,000 of wages to $80,000, so 0.9% applies to $3,115 → $28.
Total SE tax ≈ $10,436.
The 0.9% Additional Medicare Tax
Higher earners pay an extra 0.9% Medicare tax on earnings above a threshold that depends on filing status. These thresholds are set by law and are not adjusted for inflation:
| Filing status | Threshold |
|---|---|
| Single or head of household | $200,000 |
| Married filing jointly | $250,000 |
| Married filing separately | $125,000 |
For married couples filing jointly, the threshold applies to your combined wages and self-employment earnings. This calculator uses the earnings you enter, so if your spouse also works, add their wages to the W-2 field for a closer estimate. The Additional Medicare Tax is figured on Form 8959, not Schedule SE.
The deduction you get back
You can deduct half of your self-employment tax (not counting the 0.9% Additional Medicare Tax) as an adjustment to income on Schedule 1. It lowers your income tax, not your SE tax. In the $85,000 example, that is about a $6,005 deduction.
How and when to pay it
Nobody withholds SE tax for you, so the IRS expects you to pay during the year through estimated tax payments (Form 1040-ES) if you expect to owe at least $1,000 when you file. For the 2026 tax year the four due dates are:
| Payment | Covers income earned | Due date |
|---|---|---|
| 1st | Jan 1 – Mar 31, 2026 | April 15, 2026 |
| 2nd | Apr 1 – May 31, 2026 | June 15, 2026 |
| 3rd | Jun 1 – Aug 31, 2026 | September 15, 2026 |
| 4th | Sep 1 – Dec 31, 2026 | January 15, 2027 |
Estimated payments cover income tax too, so plan for both. Underpaying can lead to a penalty even if you pay the full amount when you file.
Ways to lower self-employment tax
- Claim every legitimate business expense. SE tax is based on profit, so each deductible dollar of expense saves 15.3 cents of SE tax on top of income tax.
- Know what does not reduce it. Retirement contributions to a SEP-IRA or Solo 401(k), and the self-employed health insurance deduction, lower income tax but not SE tax.
- Consider an S corporation once profit is high. Owners take a reasonable salary (subject to payroll tax) and may take remaining profit as distributions that are not. The extra payroll, bookkeeping and state costs mean it rarely pays off at low profit — get advice before switching.
Frequently asked questions
Do I owe self-employment tax on a side gig?
Yes, if your net earnings from self-employment are $400 or more for the year, even if you also have a full-time job.
Is self-employment tax the same as income tax?
No. SE tax funds Social Security and Medicare. Income tax is calculated separately using tax brackets, and you usually owe both.
What if my business had a loss?
If your combined net earnings from self-employment are below $400, there is generally no SE tax for the year.
Why is my SE tax lower than 15.3% of profit?
Because the tax applies to 92.35% of profit, the effective rate on profit is about 14.1% below the Social Security wage base — and lower still once you pass it.