What self-employment tax is
Self-employment (SE) tax is how people who work for themselves pay into Social Security and Medicare. Employees split these taxes with their employer, 7.65% each. When you are your own boss you pay both shares, so the rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare. You figure it on Schedule SE and pay it with your income tax on Form 1040.
It applies to sole proprietors, independent contractors with 1099 income, gig workers, freelancers, single-member LLCs and partners in a business, once net earnings from self-employment reach $400 in the year. It is due even when you owe no income tax at all.
The formula (Schedule SE, 2026)
- Net earnings = net profit × 92.35%. The 7.65% reduction mirrors the employer half of the tax, which an employee never sees on a paycheck.
- Social Security = 12.4% × the smaller of net earnings and $184,500 minus any W-2 Social Security wages.
- Medicare = 2.9% × all net earnings, with no limit.
- Self-employment tax = Social Security + Medicare.
- Deduction: half of the self-employment tax comes off your income on Schedule 1, which lowers income tax (not SE tax).
SE tax = 12.4% × min(0.9235 × profit, $184,500 − W-2 wages) + 2.9% × 0.9235 × profit
On top of that, the Additional Medicare Tax of 0.9% applies to self-employment earnings above $200,000 (single and head of household) or $250,000 (married filing jointly), reduced by any wages. It is reported on Form 8959 and is not part of the half-SE deduction.
Worked example: $50,000 profit
- Net earnings: 50,000 × 0.9235 = $46,175
- Social Security: 46,175 × 12.4% = $5,725.70
- Medicare: 46,175 × 2.9% = $1,339.08
- Self-employment tax: $7,064.78, which is 14.13% of the $50,000 profit
- Deduction for half: $3,532.39, which saves income tax at your bracket rate
Worked example: high earner
With $200,000 of profit, net earnings are $184,700. Social Security stops at the $184,500 wage base, so it is 12.4% × 184,500 = $22,878, the most anyone pays in 2026. Medicare is 2.9% × 184,700 = $5,356.30, for SE tax of $28,234.30. Every extra dollar of profit beyond that point costs only the 2.9% Medicare part (plus 0.9% once net earnings pass $200,000).
Worked example: side business and a job
An engineer earns $170,000 in W-2 wages and makes $30,000 profit consulting on weekends. The wages have already used $170,000 of the $184,500 wage base, so only $14,500 of the $27,705 net earnings is subject to Social Security: 12.4% × 14,500 = $1,798. Medicare is 2.9% × 27,705 = $803.45. SE tax is $2,601.45 instead of the $4,238.87 someone without a job would pay on the same profit.
SE tax at a glance
| Net profit | Net earnings (92.35%) | SE tax | Half-SE deduction |
|---|---|---|---|
| $5,000 | $4,617.50 | $706.48 | $353.24 |
| $20,000 | $18,470 | $2,825.91 | $1,412.96 |
| $50,000 | $46,175 | $7,064.78 | $3,532.39 |
| $100,000 | $92,350 | $14,129.55 | $7,064.78 |
| $150,000 | $138,525 | $21,194.32 | $10,597.16 |
| $200,000 | $184,700 | $28,234.30 | $14,117.15 |
Ways to lower it legally
- Claim every business expense. SE tax is based on profit, so a $1,000 deduction saves about $141 of SE tax before any income tax saving. Mileage is often the largest one for drivers; see the mileage deduction calculator.
- Know what does not help. The standard deduction, the QBI deduction, self-employed health insurance and SEP or solo 401(k) contributions lower income tax but not SE tax.
- S corporation election. Owners of a profitable business sometimes elect S corporation status and pay themselves a reasonable salary, so only that salary carries payroll tax. It adds payroll, bookkeeping and state costs, and the salary must be realistic, so it is a decision to make with a tax professional.
Common mistakes
- Multiplying the whole profit by 15.3%. The tax applies to 92.35% of profit, which is why the effective rate is 14.13%.
- Ignoring wages from a job. W-2 wages count toward the Social Security wage base first, which can sharply reduce SE tax for high earners.
- Thinking a loss year carries SE tax forward. SE tax is figured each year; a loss means no SE tax for that business, and profits and losses of several businesses are combined.
- Forgetting the $400 floor runs on net earnings. $433 of profit is $399.88 of net earnings and owes nothing; $434 of profit owes SE tax on the full amount.
Church employees, farmers using the optional methods, ministers and people covered by a totalization agreement have special rules on Schedule SE. Paying SE tax also earns Social Security credits toward your future benefits.
Frequently asked questions
What is the self-employment tax rate for 2026?
15.3% of 92.35% of net profit: 12.4% for Social Security on up to $184,500 of combined earnings and 2.9% for Medicare on everything. A further 0.9% applies above $200,000 ($250,000 married filing jointly).
How much self-employment tax do I pay on $50,000?
On $50,000 of net profit, self-employment tax is $7,064.78: Social Security of $5,725.70 and Medicare of $1,339.08 on net earnings of $46,175. You then deduct half, $3,532.39, from income.
Do I pay self-employment tax if I also have a W-2 job?
Yes, on the side profit. But your W-2 wages count toward the $184,500 Social Security wage base first, so if wages and side earnings together pass it, you pay only Medicare on the part above the base.
Is self-employment tax deductible?
Half of it is, as an adjustment to income on Schedule 1. That lowers your income tax, not the self-employment tax itself.
At what income do I have to pay self-employment tax?
When net earnings from self-employment are $400 or more in the year, which is net profit of about $434 or more.
Sources
- Internal Revenue Service. Schedule SE (Form 1040) and instructions.
- Internal Revenue Service. Topic 554, Self-Employment Tax; Self-employment tax (Social Security and Medicare taxes).
- Social Security Administration. Contribution and benefit base: $184,500 for 2026.
- Internal Revenue Service. Topic 560, Additional Medicare Tax.
Last reviewed 29 October 2026. Results are estimates; see our disclaimer.