Self-Employment Tax
Understand the 15.3% self-employment tax, how it is figured, and the deductions that soften it.
TL;DR
- Pay 15.3%
selfEmploymentTaxon net earnings once profit tops $400. - Figure it on 92.35% of profit, then deduct half from your income.
- Send
quarterlyEstimatessince no employer withholds tax for you.
What SE Tax Is
Both HalvesYou pay the worker and employer shares of payroll tax.
7.65% + 7.65% = 15.3%On Net EarningsIt applies to profit, not gross revenue.
Revenue - expenses = netThe $400 LineYou owe SE tax once net earnings reach this amount.
Net $400+ = SE tax dueSeparate From Income TaxSE tax is on top of your regular income tax.
SE tax + income taxHow It Is Figured
The 92.35% StepMultiply profit by 92.35% before applying the rate.
Profit x 0.9235Apply 15.3%The rate hits the adjusted amount up to the wage base.
Adjusted profit x 15.3%Wage Base CapThe 12.4% Social Security part stops at the cap.
SS part caps at $184,500Deduct HalfHalf of the SE tax comes off your income.
50% of SE tax on Schedule 1Deductions That Help
Half of SE TaxAutomatic and available even without itemizing.
Above-the-line deductionHome OfficeA space used only for business earns a deduction.
$5/sq ft, up to $1,500Health PremiumsDeduct 100% of your own health insurance premiums.
Self-employed health deductionRetirement PlansA SEP-IRA or solo 401(k) shelters a big chunk of profit.
Up to $72,000 in 2026Pay As You Go
Four PaymentsEstimate and pay tax four times a year.
Apr 15, Jun 15, Sep 15, Jan 15Who Must PayAnyone expecting to owe $1,000 or more.
Expect $1,000+? Pay quarterlySafe HarborMatch last year's tax to avoid penalties.
100% of last year (110% over $150k)Set Money AsideBank a share of each payment for taxes.
Save 25%-30% of profitTips
- Deduct the
halfSEtaxautomatically; it comes off your income with no itemizing, and good software claims it for you. - Fund a
SEP-IRAor solo 401(k) to shelter up to $72,000 of profit while building retirement savings at the same time.
Warnings
- The half-SE-tax deduction lowers your income tax but not the
SEtaxitself, so budget for the full 15.3% on profit. - Missing a
quarterlyEstimatebrings an underpayment penalty even when you pay the whole balance by April 15.
In Practice
Walk through the self-employment tax calculation and the deductible half.
Your freelance business nets $60,000 in profit for 2026.
- Adjust the profit: $60,000 x 92.35% = $55,410.
- Apply the rate: $55,410 x 15.3% = $8,478 SE tax.
- Deduct half: $8,478 / 2 = $4,239 off your income.
- The $4,239 lowers income tax, not the SE tax itself.
You owe about $8,478 in SE tax and deduct $4,239 from income.
Budget for the full 15.3%; the half deduction only trims your income tax.
FAQ
It is Social Security and Medicare tax for people who work for themselves. Employees split these with their employer, each paying 7.65%. Because you are both worker and employer, you pay both halves: 12.4% for Social Security up to the wage base plus 2.9% for Medicare, which is 15.3% of your net earnings.
Take your net profit and multiply by 92.35%, which stands in for the employer's share. Apply 15.3% to that figure to get your SE tax. Then deduct half of the result from your gross income on Schedule 1. The 92.35% step keeps you from paying the tax on the deductible half.
Yes, if you expect to owe $1,000 or more for the year. Because no employer withholds for you, the IRS wants tax paid as you earn, in four installments. Paying at least 100% of last year's tax, or 110% if your AGI topped $150,000, keeps you safe from penalties under the safe harbor rule.
Beyond the automatic half of SE tax, you can deduct a home office used only for work, health insurance premiums, retirement contributions to a SEP-IRA or solo 401(k), and every ordinary business expense. Eligible owners may also take the 20% qualified business income deduction on top.