Does a Single-Member LLC Pay Self-Employment Tax?

Yes. A single-member LLC does pay self-employment tax by default, because the IRS treats the business as a disregarded entity and taxes its owner the same way it taxes a sole proprietor. The combined rate is 15.3 percent on net earnings of $400 or more, and it applies whether you take the money out of the business or leave it in the account.¹

Why the Tax Applies to You

Under the IRS entity-classification rules, a single-member LLC is a “disregarded entity” unless you elect otherwise. The agency looks past the LLC wrapper for federal income tax purposes and treats you and the business as one taxpayer.² There is no separate business return. Your profit or loss goes on Schedule C of your Form 1040, and that profit is subject to self-employment tax exactly as a sole proprietor’s would be.³

The LLC still shields your personal assets from most business liabilities. It just does not give you any tax advantage on its own.

The Rates and the $400 Threshold

Self-employment tax funds Social Security and Medicare. An employee splits these taxes with an employer; when you work for yourself, you pay both halves.⁴

Social Security (OASDI): 12.4 percent on net earnings up to $184,500 for the 2026 tax year.⁵
Medicare: 2.9 percent on all net earnings, with no cap.
Additional Medicare Tax: 0.9 percent on self-employment income above $200,000 for single filers, $250,000 for joint filers, and $125,000 for married filing separately.⁶

You owe self-employment tax once your net earnings hit $400 for the year.¹ Once your earnings pass $184,500, the 12.4 percent Social Security portion stops on the excess, but the 2.9 percent Medicare portion keeps running on every additional dollar. If you also earn W-2 wages, those wages count toward the Social Security cap first.

How the Math Actually Works

Start with net profit from Schedule C: gross receipts minus allowable expenses such as supplies, advertising, rent, and business travel.⁷ That number carries over to Schedule SE, but you do not apply 15.3 percent to the full amount. First you multiply net profit by 92.35 percent. This adjustment reflects the fact that an employer’s share of payroll tax is not itself taxed, so a self-employed person is not taxed on the tax either.¹

A simple 2026 example on $100,000 of net profit:

Step 1: $100,000 × 92.35% = $92,350 in taxable self-employment earnings.
Step 2: $92,350 × 12.4% = $11,451.40 for Social Security.
Step 3: $92,350 × 2.9% = $2,678.15 for Medicare.
Total self-employment tax: $14,129.55.

If your adjusted earnings run past $184,500, drop the 12.4 percent on the excess and keep the 2.9 percent (plus the 0.9 percent surtax if you cross those income thresholds) on everything above.

Deductions That Lower Your Overall Tax

Two deductions do not reduce self-employment tax itself but cut the income tax you pay on top of it.

The first is the deduction for one-half of your self-employment tax, excluding the 0.9 percent Additional Medicare portion. It is an above-the-line deduction, so you get it whether or not you itemize.⁸ On the $14,129.55 bill above, roughly $7,065 comes off your adjusted gross income.

The second is the self-employed health insurance deduction. If your business establishes the policy, you can generally deduct 100 percent of premiums for yourself, your spouse, your dependents, and children under age 27.⁹ You claim it on Schedule 1, not Schedule C, so it does not reduce net profit for self-employment tax purposes. You also cannot claim it for any month you were eligible for a subsidized plan through your own employer, a spouse’s employer, or a parent’s employer.

One deduction whose status is currently unsettled is the Section 199A qualified business income deduction of up to 20 percent, which reduces income tax on pass-through profits.¹⁰ As enacted, it applied to tax years ending on or before December 31, 2025, and Congress has considered extending it. Confirm with the IRS or a tax professional whether it is available for your 2026 return before planning around it.

Paying It Through the Year

Nobody is withholding tax from your LLC income, so you generally pay in quarterly using Form 1040-ES. The 2026 due dates:

First quarter: April 15, 2026
Second quarter: June 15, 2026
Third quarter: September 15, 2026
Fourth quarter: January 15, 2027

You can skip the January payment if you file your 2026 return and pay in full by February 1, 2027.¹¹

The IRS charges an underpayment penalty if you owe $1,000 or more at filing and did not prepay enough. Safe harbor generally means paying in at least 90 percent of the current year’s tax or 100 percent of last year’s, whichever is smaller. If your prior-year AGI was above $150,000 ($75,000 if married filing separately), the prior-year figure rises to 110 percent.¹²

Cutting the Bill With an S Corporation Election

A single-member LLC can elect S corporation taxation by filing Form 2553. To take effect for the current year, file no more than two months and 15 days after the tax year starts, or any time in the preceding year.¹³ For a calendar-year LLC, that deadline is March 15.¹⁴

Under S corp treatment, you pay yourself a reasonable salary through payroll and withhold employment taxes on it. Profit distributed above that salary is not subject to the 15.3 percent self-employment tax.¹⁵ That split is where the savings live.

The catch is “reasonable.” The IRS looks at your training, duties, hours, comparable pay for similar work, and the business’s distribution history when deciding whether your salary is defensibly set. A salary chosen just to minimize payroll tax invites audit.¹⁶

Internal Revenue Service. Topic No. 554, Self-Employment Tax

eCFR. 26 CFR 301.7701-3 – Classification of Certain Business Entities

Internal Revenue Service. Single Member Limited Liability Companies

Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax

Social Security Administration. Contribution and Benefit Base

Internal Revenue Service. Topic No. 560, Additional Medicare Tax

Internal Revenue Service. Instructions for Schedule C (Form 1040)

Office of the Law Revision Counsel. 26 USC 164(f) – Deduction for One-Half of Self-Employment Taxes

Internal Revenue Service. Instructions for Form 7206

Internal Revenue Service. Qualified Business Income Deduction

Internal Revenue Service. Form 1040-ES – Estimated Tax for Individuals

Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty