Self-employment tax is the Social Security and Medicare tax that people who work for themselves pay on their net earnings. An employee has these taxes withheld from each paycheck and the employer pays a matching amount. A self-employed person has no employer, so they pay both halves. The Internal Revenue Service (IRS) puts the combined rate at 15.3%: 12.4% for Social Security and 2.9% for Medicare. It is calculated on Schedule SE and is separate from income tax, which means it can be owed even in a year when income tax is zero.
That short answer covers what the tax is. The rest of this guide explains why it is built this way, where it stops, and which parts of the calculation surprise people in their first year of freelance or contract work. It is general information about US federal tax, not advice for any individual return.
What is self employment tax, in plain terms
Every US worker who earns covered income pays into two federal social insurance programs: Social Security (old-age, survivors and disability insurance) and Medicare (hospital insurance). For employees, the collection method is the Federal Insurance Contributions Act, known as FICA. For the self-employed, it is the Self-Employment Contributions Act, or SECA. Self-employment tax is simply the SECA version of the same contribution.
The IRS describes it on its page Self-employment tax (Social Security and Medicare taxes) (last reviewed June 27, 2026, read September 27, 2026): "The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security… and 2.9% for Medicare."
Who counts as self-employed for this purpose is broad: sole proprietors, independent contractors, freelancers and gig workers paid on a Form 1099-NEC, and members of a partnership that carries on a trade or business. The form that brings it to the surface is usually a 1099-NEC, although the tax applies to net earnings from self-employment whether or not any form was issued.
Why the tax exists: the missing employer
The reason self-employment tax feels large is structural, not a penalty. Under FICA, the contribution is split. According to IRS Tax Topic 751, Social Security and Medicare withholding rates (last reviewed September 24, 2026, read September 27, 2026), the rates are "6.2% for the employer and 6.2% for the employee" for Social Security and "1.45% for the employer and 1.45% for the employee" for Medicare.
Add the two sides together and the result is 12.4% plus 2.9%, the same 15.3% the self-employed pay. An employee sees only 7.65% on a pay stub because the other 7.65% is paid by the employer and never appears in the paycheck. A self-employed person is both employer and employee, so both halves land in one place.
| Contribution | Employee pays | Employer pays | Self-employed person pays |
|---|---|---|---|
| Social Security | 6.2% | 6.2% | 12.4% |
| Medicare | 1.45% | 1.45% | 2.9% |
| Total | 7.65% | 7.65% | 15.3% |
Rates from IRS Tax Topic 751 and the IRS self-employment tax page, read September 27, 2026. They apply to the tax years those pages state and can change by law.
The contribution buys the same thing in both cases. Self-employment earnings reported on Schedule SE are credited to the person's Social Security earnings record, which is what later determines eligibility for retirement, disability and survivor benefits. A self-employed person who reports little or no net earnings also builds little or no Social Security record for those years.
What the tax is charged on, and what it is not
Self-employment tax applies to net earnings from self-employment: business income minus the ordinary and necessary business expenses allowed against it. It does not apply to gross receipts. Two people each paid the same amount on a 1099-NEC can owe very different amounts if their allowable expenses differ.
There is also a filing floor. The IRS self-employment tax page states that a return is required if net earnings from self-employment "were $400 or more," with a separate, lower threshold for church employee income. Below that amount, no self-employment tax is due for the year, although income tax rules still apply separately.
Schedule SE does not simply multiply net profit by 15.3%. The form first scales net earnings down by a fixed factor printed on its lines before applying the rate. The effect mirrors the employee's situation, where the employer's half of FICA is never counted as the employee's wages. The exact line-by-line calculation is in the Schedule SE instructions for the tax year being filed.
Where the tax stops: the Social Security wage base
The two halves of self-employment tax do not behave the same way at higher earnings.
- The Social Security part has a ceiling. For 2026, IRS Tax Topic 751 states: "For earnings in 2026, this base limit is $184,500." Above that amount, no further 12.4% is owed for the year. The limit is adjusted every year, so an earlier year's return uses that year's figure.
- The Medicare part has no ceiling. The 2.9% applies to all net earnings from self-employment.
- An extra 0.9% Medicare tax can apply. The IRS self-employment tax page states that the additional 0.9% Medicare tax applies when wages, compensation or self-employment income exceed a threshold set by filing status, including $200,000 for single filers and $250,000 for married couples filing jointly.
A detail that matters to people with a job and a side business: wages and self-employment earnings share one Social Security limit. Wages already taxed for Social Security count toward the ceiling first, which can reduce or eliminate the 12.4% portion on the self-employment side. Schedule SE walks through that interaction.
The deduction that softens it
Because an employer can deduct its half of FICA as a business expense, the tax code gives the self-employed a parallel deduction. IRS Publication 334, Tax Guide for Small Business (2025 edition, read September 27, 2026), states: "Deduct one-half of your SE tax as an adjustment to income on line 15 of Schedule 1 (Form 1040)."
Two points about this deduction are often misunderstood:
- It reduces income tax, not self-employment tax. The deduction lowers adjusted gross income, which affects the income tax calculation. It does not lower the self-employment tax itself.
- It is available whether or not the filer itemizes. It is an adjustment to income, taken before the standard or itemized deduction.
A related misunderstanding involves retirement savings. Contributions to a traditional retirement account can lower taxable income for income tax purposes, but they do not generally reduce the net earnings on which self-employment tax is figured. The difference between pre-tax and after-tax contributions is explained in our guide to where the tax hits in traditional and Roth accounts, and the account types open to self-employed people are covered in the main types of retirement accounts.
How self-employment tax is paid during the year
Nobody withholds self-employment tax from a client payment. The IRS self-employment tax page notes that estimated tax is the usual method for paying Social Security, Medicare and income taxes on self-employment income. That means quarterly payments during the year, with the total reconciled on Form 1040 and Schedule SE at filing time.
For a first-year freelancer, this is where the surprise usually comes from. The income tax on a modest profit may be small, particularly after the standard deduction, while self-employment tax starts from the first dollar of net earnings above the $400 floor. A return can show little or no income tax and still show a meaningful self-employment tax balance.
When to bring in a professional
The mechanism is fixed by law, but applying it depends on facts only the filer has: which expenses are allowable, whether an activity is a business or a hobby, whether a worker is an employee or a contractor, and how wages from a job interact with the wage base. For those questions, a CPA, an enrolled agent or another tax professional is the right route. They will generally want every 1099 received, records of business income and expenses, any W-2s for the year and the prior year's return.
The figures in this article are tied to the tax years stated and change every year. The IRS publishes the current Social Security wage base and Medicare thresholds each year, and the Schedule SE instructions for the year being filed are the controlling document.
Frequently asked questions
Is self-employment tax the same as income tax?
No. Self-employment tax funds Social Security and Medicare and is calculated on Schedule SE. Income tax is calculated separately on Form 1040 using brackets, deductions and credits. A self-employed person can owe one without the other.
Why is self-employment tax 15.3%?
Because it combines the employee and employer shares of FICA. IRS Tax Topic 751 lists 6.2% each for Social Security and 1.45% each for Medicare. A self-employed person pays both halves, which totals 15.3%.
Do I pay self-employment tax on all my income?
It applies to net earnings from self-employment, meaning business income minus allowable business expenses, not to wages from a job or to gross receipts. The Social Security portion also stops at the annual wage base, which the IRS lists as $184,500 for 2026.
Is there a minimum before self-employment tax applies?
Yes. According to the IRS self-employment tax page, Schedule SE applies when net earnings from self-employment are $400 or more, with a separate threshold for church employee income.
Can half of self-employment tax be deducted?
Yes. IRS Publication 334 describes deducting one-half of self-employment tax as an adjustment to income on Schedule 1 (Form 1040). It lowers income tax, not the self-employment tax itself.
Tax figures and thresholds change every year. The amounts in this article are for the tax years stated and were checked against IRS sources on September 27, 2026.
