Self-employment tax, explained simply
Self-employment tax is the 15.3% Social Security and Medicare tax you pay on your net business earnings, because no employer pays half for you. It applies once you make $400 or more. For 2026, the Social Security part stops at $184,500. You also deduct half of it on your return.
Updated November 2026 · By Pankil Kumar, Managing Partner
Quick facts
- Rate. 12.4% Social Security plus 2.9% Medicare
- Starts at. $400 of net self-employment earnings
- 2026 cap. Social Security portion stops at $184,500
How is it calculated?
You work it out on Schedule SE. Start with your net profit from Schedule C or your partnership. Multiply by 92.35%, then apply 15.3%. Half of that is deducted from your income on Form 1040.
| Net profit | Earnings subject to SE tax | SE tax |
|---|---|---|
| $20,000 | $18,470 | About $2,826 |
| $60,000 | $55,410 | About $8,477 |
| $100,000 | $92,350 | About $14,130 |
The 12.4% Social Security part only applies up to the wage base, $184,500 for 2026. Medicare's 2.9% has no cap, and a 0.9% additional Medicare tax kicks in on earnings above $200,000 for single filers.
Is it on top of income tax?
Yes, and that's what surprises first-year freelancers. Someone in the 12% bracket can owe 12% income tax plus around 14% SE tax. That's why a common rule is to set aside 25% to 30% of your profit.
Who pays it?
Sole proprietors, freelancers, independent contractors, partners in an active business and single-member LLC owners. S-Corp owners don't pay it on their K-1 profit. They pay FICA on their salary instead, which is the idea behind an S-Corp election.
How can you lower it?
Every legitimate business expense lowers your profit, which lowers this tax too. So tracking deductions counts double. Retirement contributions and health insurance reduce income tax, but they generally don't reduce SE tax. For more ways, see how to reduce self-employment tax.
When do you pay it?
Nobody withholds it, so you pay through quarterly estimated taxes due in April, June, September and January. Missing them can bring a penalty. It also gives you Social Security credits, which count toward your retirement and disability benefits. So paying a little more now isn't a total loss.
Sources
General information, not tax advice for your situation.
Do I pay self-employment tax if I also have a W-2 job?
Yes, if you earn $400 or more from self-employment. Your W-2 wages count toward the Social Security cap, so you may pay less.
Is self-employment tax deductible?
Half of it is, as an adjustment to income on Form 1040.
Do I pay self-employment tax on an LLC?
If it's a single-member LLC or a partnership in an active business, usually yes, unless you've elected S-Corp treatment.
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