Yes. Self-employed people do pay Social Security tax, and they pay it through what the IRS calls the self-employment tax. The combined rate is 15.3% on net earnings, which covers both Social Security (12.4%) and Medicare (2.9%).1Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) A traditional employee splits that cost with an employer; when you work for yourself, you owe both halves. The obligation kicks in at $400 of net self-employment earnings for the year, regardless of whether you owe any income tax.
How Much You Actually Owe
The 15.3% rate does not apply to your gross revenue. You first subtract your business expenses to get net profit. Then you multiply that net profit by 92.35% to arrive at the amount subject to the tax.1Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) That 92.35% adjustment exists because W-2 employees are not taxed on the employer’s share of payroll taxes, so the math puts you on roughly equal footing.
A quick example: $80,000 in net profit times 0.9235 gives $73,880 in taxable self-employment income. Apply 15.3% and you owe $11,303.64 in self-employment tax for the year.
The Social Security portion has a ceiling. For 2026, only the first $184,500 of covered earnings is subject to the 12.4% Social Security rate.2Social Security Administration. Contribution and Benefit Base Above that wage base, the 12.4% stops but the 2.9% Medicare portion keeps running on every additional dollar. The Social Security Administration resets the cap each year based on national average wages.
Higher earners also pay an extra 0.9% Additional Medicare Tax once self-employment income (after the 92.35% adjustment) crosses a threshold set by filing status: $200,000 for single or head of household, $250,000 for married filing jointly, and $125,000 for married filing separately.3Internal Revenue Service. Questions and Answers for the Additional Medicare Tax These thresholds do not adjust for inflation.4Internal Revenue Service. Instructions for Form 8959
If You Also Have a W-2 Job
W-2 wages count first toward the Social Security cap. Say your employer paid you $150,000 in 2026. Only the next $34,500 of self-employment earnings would face the 12.4% Social Security rate, because that brings the combined total to $184,500.2Social Security Administration. Contribution and Benefit Base If your wages alone hit or exceed $184,500, you owe zero Social Security tax on your side income. Medicare’s 2.9% still applies to every dollar of self-employment earnings, no matter how high your W-2 wages go.1Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
What Paying This Tax Earns You
The self-employment tax is the mechanism that builds your Social Security and Medicare record. Each year you pay, you earn credits toward future benefits. In 2026, one credit costs $1,890 in net self-employment income, with a cap of four credits per year, so $7,560 in covered earnings maxes out your credits for the year.5Social Security Administration. Social Security Credits
Those credits determine what you can claim later:
- Retirement benefits require 40 credits, roughly ten years of covered work.6Social Security Administration. How You Earn Credits
- Disability benefits generally require 40 credits with 20 earned in the last ten years, though younger workers can qualify with fewer.7Social Security Administration. How Does Someone Become Eligible
- The Medicare portion builds toward eligibility for Medicare Part A hospital insurance.
If you skip self-employment tax, you do not earn credits for those years. Decades of unreported self-employment could leave you short of what you need to draw benefits at all.
How and When You Pay
You calculate self-employment tax on Schedule SE (Form 1040), which pulls the net profit from your Schedule C, applies the 92.35% multiplier, and runs the 15.3% rate.1Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) You then deduct half of the self-employment tax as an adjustment to income on Schedule 1, Line 15. That deduction reduces your income tax; it does not reduce the self-employment tax itself.8Internal Revenue Service. Instructions for Schedule C (Form 1040) You need a valid Social Security Number or ITIN so the Social Security Administration can credit your earnings to your record.
Most self-employed people cannot wait until April to settle up. If you expect to owe $1,000 or more in total tax after withholding and credits, the IRS requires quarterly estimated payments using Form 1040-ES.9Internal Revenue Service. Estimated Taxes For the 2026 tax year, the four deadlines are April 15, 2026; June 15, 2026; September 15, 2026; and January 15, 2027.10Internal Revenue Service. Form 1040-ES – Estimated Tax for Individuals (2026) You can skip the January payment if you file the return and pay in full by February 1, 2027. IRS Direct Pay, EFTPS, card, and digital wallet payments all work, or you can mail a check with the payment voucher.
You can avoid underpayment penalties by hitting one of two safe harbors. Your payments need to cover the smaller of 90% of the tax you end up owing for 2026 or 100% of the tax shown on your 2025 return.10Internal Revenue Service. Form 1040-ES – Estimated Tax for Individuals (2026) If your 2025 adjusted gross income was over $150,000 ($75,000 if married filing separately), the prior-year figure rises to 110%.
Who Is Exempt
Almost no one gets out of this. Two narrow exemptions exist:
- Members of recognized religious groups that have existed continuously since December 31, 1950, are conscientiously opposed to insurance benefits including Social Security and Medicare, and provide for their dependent members. Approval through Form 4029 permanently waives the right to receive Social Security and Medicare benefits.11Internal Revenue Service. Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits
- Nonresident aliens are generally not liable for self-employment tax on U.S.-source income. Once someone becomes a resident alien under federal tax rules, self-employment tax applies on the same terms as for a U.S. citizen.12Internal Revenue Service. Alien Liability for Social Security and Medicare Taxes of Foreign Teachers, Foreign Researchers and Other Foreign Professionals
There is no age exemption. Even if you are already drawing Social Security retirement benefits, self-employment earnings still owe the tax.
One Way to Legitimately Reduce It
Sole proprietors owe self-employment tax on their full net profit. Electing S corporation status changes the picture: the business pays you a salary (subject to payroll taxes) and can distribute remaining profits to you as a shareholder (not subject to self-employment or payroll tax). The catch is that the IRS requires the salary to be “reasonable,” meaning it must match what someone in a similar role and industry would earn.13Internal Revenue Service. S Corporation Employees, Shareholders and Corporate Officers Setting the salary artificially low invites IRS scrutiny, and courts have sided with the IRS when businesses tried to route nearly everything through distributions. The structure also brings payroll processing, separate tax filings, and state fees. It tends to make sense only when profits sit well above a reasonable salary for the work.