How self-employment tax is calculated
- Start with net profit from self-employment (income minus deductible business expenses).
- Multiply by 92.35%. This mirrors the fact that employees don't pay FICA on the employer's half of FICA.
- Apply 12.4% Social Security tax up to the 2026 wage base of $184,500 (minus any W-2 wages).
- Apply 2.9% Medicare tax on all of it, plus a 0.9% Additional Medicare Tax above $200,000 (single) or $250,000 (married filing jointly).
SE tax = (Net profit × 0.9235) × 15.3% (up to the wage base)
Example
A designer with $75,000 of net profit has $69,262.50 of net earnings from self-employment. Social Security tax is $8,588.55 and Medicare tax is $2,008.61, for a total SE tax of $10,597.16. Half of that, $5,298.58, is deductible when figuring income tax.
You don't owe SE tax if...
Your net earnings from self-employment are less than $400 for the year. (You may still owe income tax and need to file.)
How to lower self-employment tax
- Claim every business expense: home office, equipment, software, mileage, a share of phone and internet. Each dollar of expense saves about 14 cents of SE tax plus income tax.
- Consider an S corporation once profits are steady and high (often $60,000 to $80,000+). You pay yourself a reasonable salary and take the rest as distributions that aren't subject to SE tax, but you take on payroll costs and stricter compliance.
- Note that retirement contributions (SEP IRA, solo 401(k)) and health insurance premiums reduce income tax but not SE tax.
Frequently asked questions
What is the self-employment tax rate for 2026?
15.3%: 12.4% for Social Security on net earnings up to $184,500, and 2.9% for Medicare with no cap. An extra 0.9% Medicare tax applies above $200,000 (single) or $250,000 (married filing jointly).
Is self-employment tax in addition to income tax?
Yes. You pay SE tax and federal income tax (and possibly state income tax) on your self-employment profit. Use the 1099 tax calculator to see both.
Can I deduct self-employment tax?
You can deduct half of your SE tax (excluding the Additional Medicare Tax) as an adjustment to income on Schedule 1. It lowers income tax, not SE tax.
Which form is used for self-employment tax?
Schedule SE, filed with your Form 1040. Your profit comes from Schedule C.
Last reviewed: 2026-10-09