Self-employment tax is Social Security and Medicare tax for people who work for themselves. If you are a freelancer, a sole proprietor or an independent contractor, you pay both the employee and the employer halves.
By Amara Taylor
Quick answer: You generally owe self-employment tax if your net earnings from self-employment reach $400. The rate is 15.3%, made up of 12.4% for Social Security and 2.9% for Medicare, and it is applied to 92.35% of your net profit. You can deduct half of it when figuring your income tax.
The IRS counts sole proprietors, including independent contractors, partners in a partnership, and members of a single-member LLC that is ignored for federal income tax purposes. You report the business on Schedule C, and the self-employment tax on Schedule SE.
Age and benefits do not exempt you. The IRS states that the rules apply even if you already receive Social Security or Medicare. A person with a day job and a side business owes it on the side income, too.
The Schedule SE instructions put the practical trigger at $434 of net profit, which is $400 after the 92.35% adjustment, so very small amounts of side income fall below it.
A single filer has $80,000 of net profit in 2026 and no W-2 job.
| Step | Amount |
|---|---|
| Net earnings: $80,000 × 92.35% | $73,880 |
| Social Security: 12.4% | $9,161 |
| Medicare: 2.9% | $2,143 |
| Self-employment tax | $11,304 |
| Deductible half | $5,652 |
The effective rate on profit is about 14.1%. If the same filer also had a $100,000 W-2 job, only $84,500 of the Social Security cap would remain, so the Social Security portion would be capped while Medicare would still apply to every dollar.
You may deduct half of your self-employment tax when you figure adjusted gross income, which the IRS describes as a deduction on Schedule 1. It lowers your income tax. It does not lower the self-employment tax and it does not reduce the net earnings used to compute it.
An extra 0.9% Medicare tax applies when wages and self-employment income exceed $200,000 for single filers, $250,000 for married couples filing jointly and $125,000 for married filing separately. It is calculated on Form 8959 and is separate from the 15.3%.
Nobody withholds self-employment tax from your client payments, so most people pay it through quarterly estimated taxes. The bill is figured on net profit, so every legitimate business expense reduces it.
Enter your net profit to see the Social Security and Medicare split. For income tax and self-employment tax together, use the 1099 tax calculator.
Open the self-employment tax calculatorThis guide is general information, not tax advice. Sources: IRS Topic 554, Self-employment tax, IRS self-employment tax page, IRS Schedule SE instructions, SSA contribution and benefit base. Figures last checked October 8, 2026. See our editorial standards.
Last updated: October 8, 2026 · Written by Amara Taylor, Content Lead, Anchor AI Tools.