Quick answer
Self-employment tax is 15.3% of your net self-employment earnings (which are 92.35% of your net profit). It pays for Social Security (12.4%) and Medicare (2.9%). You owe it once your net profit reaches $400 in a year. In 2026, the Social Security part applies only to the first $184,500 of earnings, and half of the tax is deductible on your income tax return.
For most freelancers, it works out to about 14.1% of net profit, paid on top of regular income tax.
What is self-employment tax?
When you’re an employee, you and your employer each pay 7.65% of your wages for Social Security and Medicare (FICA). When you work for yourself, you’re both the employee and the employer, so you pay both halves. That’s self-employment tax (SE tax).
It’s not an extra penalty for being self-employed: it funds the same Social Security and Medicare benefits you’ll receive later, and your payments count toward your Social Security credits.
2026 self-employment tax rates
| Part | Rate | Applies to |
|---|---|---|
| Social Security | 12.4% | Net SE earnings up to $184,500 (reduced by any W-2 wages) |
| Medicare | 2.9% | All net SE earnings, no cap |
| Additional Medicare tax | 0.9% | Combined wages and SE earnings above $200,000 (single) or $250,000 (married filing jointly), reported on Form 8959 |
| Total (most freelancers) | 15.3% |
Who has to pay it?
Anyone with $400 or more of net earnings from self-employment: sole proprietors, single-member LLC owners, partners in a partnership, independent contractors, gig workers, and creators. It applies whether or not you receive a 1099, and even if you owe no income tax.
How to calculate self-employment tax, step by step
- Find your net profit: business income minus business expenses (Schedule C, line 31).
- Multiply by 92.35% to get your net earnings from self-employment. This adjustment mirrors the fact that employees don’t pay FICA on the employer’s half.
- Social Security part: multiply by 12.4%, up to $184,500 of net earnings (minus any W-2 wages you had).
- Medicare part: multiply all net earnings by 2.9%.
- Add them together. That’s your self-employment tax (Schedule SE).
- Deduct half of it on Schedule 1 of your Form 1040, which lowers your income tax.
Formula: SE tax = (net profit × 0.9235) × 15.3%
Examples for 2026
| Net profit | Net SE earnings (× 92.35%) | Social Security (12.4%) | Medicare (2.9%) | SE tax | Deductible half |
|---|---|---|---|---|---|
| $30,000 | $27,705 | $3,435 | $803 | $4,239 | $2,119 |
| $75,000 | $69,263 | $8,589 | $2,009 | $10,597 | $5,299 |
| $200,000 | $184,700 | $22,878 (capped at $184,500) | $5,356 | $28,234 | $14,117 |
Notice how the rate falls slightly at high incomes: above $184,500 of net earnings you only pay the 2.9% Medicare part.
If you also have a W-2 job
Your W-2 wages count toward the $184,500 Social Security cap first. Example: you earn a $150,000 salary and $60,000 of freelance profit.
- Net SE earnings: $60,000 × 92.35% = $55,410.
- Room left under the cap: $184,500 − $150,000 = $34,500, so Social Security applies only to $34,500: $4,278.
- Medicare on all $55,410: $1,607.
- SE tax: $5,885, well below the $8,478 you’d pay on $60,000 without a salary.
- Because wages and SE earnings together exceed $200,000, about $49 of Additional Medicare tax also applies (0.9% of $5,410) on Form 8959.
For side income under a regular salary, see Side Hustle Taxes.
How to legally reduce your self-employment tax
SE tax is based on profit, so the main levers are lowering profit legitimately or changing how your income is classified:
- Deduct every legitimate business expense. Each $1,000 of deductions saves about $141 of SE tax, plus income tax. See Self-Employed Tax Deductions.
- Elect S-corp status once profits are consistently high. You pay payroll tax only on a reasonable salary, not on distributions. See LLC vs S-Corp for Freelancers.
- Home office and vehicle deductions reduce Schedule C profit, and therefore SE tax.
What doesn’t reduce SE tax: SEP IRA or Solo 401(k) contributions, the self-employed health insurance deduction, and the QBI deduction. These lower your income tax, not your SE tax, because they’re taken after Schedule C.
How to report and pay it
- Schedule C calculates your net profit.
- Schedule SE calculates your self-employment tax.
- Form 1040 (Schedule 2) adds it to your total tax; Schedule 1 deducts half of it.
- Pay during the year through quarterly estimated taxes, which include both income tax and SE tax. See Quarterly Estimated Taxes.
Frequently asked questions
What is the self-employment tax rate for 2026?
15.3% (12.4% Social Security + 2.9% Medicare) on 92.35% of net profit. The Social Security part stops at $184,500 of earnings.
Do I pay self-employment tax if I made less than $400?
No. If your net earnings from self-employment are under $400, you don’t owe SE tax, though you still report the income for income tax.
Is self-employment tax on top of income tax?
Yes. You pay both. Half of the SE tax is deductible, which reduces your income tax a little.
Does self-employment tax count toward Social Security benefits?
Yes. It earns Social Security credits and increases your future benefits, just like FICA on wages.
Why is it 92.35% and not 100%?
Employees don’t pay FICA on the employer’s half of FICA. The 92.35% (100% minus 7.65%) gives the self-employed the same treatment.
Can I avoid self-employment tax with an LLC?
Not by default. A single-member LLC pays SE tax like a sole proprietor. Only an S-corp election changes it.
This article is general information, not tax advice. Consult a CPA or Enrolled Agent for your situation.
Sources
- Social Security taxable wage base 2026 (Paycor): $184,500 wage base, 12.4% and 2.9% rates, Additional Medicare tax thresholds.
Examples are FreelancerTaxHQ calculations. The 92.35% factor, $400 threshold and Schedule SE mechanics come from IRS Schedule SE instructions and IRS Topic 554 (Self-employment tax).