Self-Employment Tax
Covers self-employment tax rates, quarterly payments, and key deductions for freelancers in 2026.
TL;DR
- 01Pay 15.3% self-employment tax on net earnings from freelance or business income.
- 02Deduct half of your SE tax to lower adjusted gross income.
- 03Make quarterly estimated payments to avoid IRS underpayment penalties.
Tips
- 01Use accounting software to track income and expenses in real time, since it makes quarterly estimates and year-end filing significantly easier.
- 02Contribute to a SEP IRA or Solo 401(k) to shrink taxable business income while building substantial retirement savings.
Warnings
- 01Missing a quarterly estimated payment triggers an underpayment penalty even if you pay your full tax bill on time at filing.
- 02The half-SE-tax deduction is automatic and easy to overlook, so confirm your tax software or preparer claims it every year.
What Is Self-Employment Tax
Self-employment (SE) tax covers Social Security and Medicare taxes for people who work for themselves. Traditional employees split these taxes with their employer. Self-employed individuals pay both halves.
- Who must file: Anyone with net self-employment income of $400 or more per year.
- Income types covered: Freelance work, independent contracting, gig economy income, sole proprietorship profits, and certain partnership income.
- Church employees: Those earning $108.28 or more from a church also owe SE tax.
SE tax is separate from federal income tax. Both apply to the same net earnings.
2026 SE Tax Rates and Thresholds
| Component | Rate | Income Cap |
|---|---|---|
| Social Security | 12.4% | $184,500 |
| Medicare | 2.9% | No cap |
| Total SE Tax | 15.3% | Up to SS cap |
| Additional Medicare Tax | 0.9% | Above $200,000 (single) / $250,000 (MFJ) |
How SE tax is calculated:
- Multiply net self-employment income by 92.35% (to account for the employer deduction).
- Apply the 15.3% rate to that adjusted amount.
- Deduct half of the resulting SE tax from your gross income on Schedule 1.
The half-SE-tax deduction reduces your adjusted gross income (AGI) but not your SE tax itself.
Key Deductions for Self-Employed Filers
- Half of SE tax: Deduct 50% of SE tax paid directly from gross income — no itemizing required.
- Home office deduction: Deduct the portion of your home used exclusively and regularly for business. Use the simplified method ($5 per sq. ft., up to 300 sq. ft.) or the actual-expense method.
- Health insurance premiums: Self-employed individuals can deduct 100% of premiums for themselves and their families, subject to income limits.
- Retirement contributions: Contribute to a SEP IRA (up to 25% of net earnings, max $72,000 in 2026) or a Solo 401(k) (up to $72,000 total in 2026).
- Business expenses: Deduct ordinary and necessary costs including equipment, software, advertising, professional fees, and travel.
- Qualified Business Income (QBI) deduction: Eligible self-employed individuals may deduct up to 20% of qualified business income under Section 199A.
Quarterly Estimated Payments
Self-employed individuals generally must pay taxes four times per year instead of once at filing.
| Payment Period | Due Date |
|---|---|
| January 1 – March 31 | April 15 |
| April 1 – May 31 | June 15 |
| June 1 – August 31 | September 15 |
| September 1 – December 31 | January 15 (following year) |
Safe harbor rule: Avoid underpayment penalties by paying at least 100% of last year's tax (or 110% if prior-year AGI exceeded $150,000) across the four installments.
Use IRS Form 1040-ES to calculate and submit estimated payments. The IRS Direct Pay tool at irs.gov accepts payments at no charge.
Common Pitfalls to Avoid
- Forgetting quarterly payments: Missing estimates triggers an underpayment penalty even if you pay in full at filing.
- Skipping the half-SE-tax deduction: This above-the-line deduction is automatic — do not leave it unclaimed.
- Poor recordkeeping: Keep receipts and mileage logs throughout the year. The IRS can disallow deductions without documentation.
- Ignoring the Additional Medicare Tax: If net income exceeds $200,000 (single), an extra 0.9% Medicare tax applies.
- Mixing personal and business finances: Separate bank accounts simplify recordkeeping and strengthen deduction claims.
FAQ
Self-employment tax covers Social Security and Medicare taxes for people who work for themselves. Traditional employees split these taxes with their employer, but self-employed individuals pay both halves, totaling 15.3% of net earnings.
Many freelancers forget to make quarterly estimated payments, which triggers an underpayment penalty even if they pay the full amount owed at filing. Others skip the automatic half-SE-tax deduction, leaving money on the table unnecessarily.
Multiply your net self-employment income by 92.35% to account for the employer-equivalent deduction, then apply the 15.3% SE tax rate to that adjusted amount. You can then deduct half of the resulting SE tax from your gross income on Schedule 1.
Yes, if you expect to owe at least $1,000 in tax for the year, the IRS requires quarterly payments instead of one lump sum at filing. The safe harbor rule lets you avoid penalties by paying at least 100% of last year's tax liability across the four installments.