How Much Is Self-Employment Tax? Rate, Cap, and Deduction

Self-employment tax is 15.3% of your net earnings from working for yourself, made up of 12.4% for Social Security and 2.9% for Medicare.¹ You apply that rate not to your full profit but to 92.35% of it, and you only owe the tax once your net earnings hit $400 for the year.² This is separate from federal income tax, which you also owe on the same profits if you are a sole proprietor, independent contractor, or partner in a business you run yourself.

Why the Rate Is 15.3%

The 15.3% is the combined employer-and-employee share of two federal payroll taxes. Social Security takes the larger piece at 12.4%, funding retirement, survivor, and disability benefits. Medicare hospital insurance takes 2.9%.¹

A W-2 employee pays half of each rate (6.2% and 1.45%) while the employer covers the other half. When you work for yourself, you are both parties, so you pay both halves. To keep the burden roughly comparable to an employee’s, the tax code lets you deduct the employer-equivalent half on your income tax return and only applies the rate to 92.35% of your profit.

The Social Security Cap and Medicare Surcharge

The 12.4% Social Security portion only applies up to an annual wage base. For 2026, the cap is $184,500 of adjusted net earnings.³ Anything above that is free of the Social Security tax. The cap adjusts for inflation each year.

The 2.9% Medicare tax has no cap and applies to every dollar of net earnings. On top of that, an Additional Medicare Tax of 0.9% applies to self-employment income above a fixed threshold set by filing status:⁴

Single, head of household, or qualifying surviving spouse: $200,000
Married filing jointly: $250,000
Married filing separately: $125,000

These thresholds are written into the statute as fixed amounts and do not adjust for inflation.¹ Unlike the regular Medicare tax, the 0.9% surcharge has no employer-equivalent half, so none of it is deductible.

Calculating What You Owe

Start with your net profit: gross business income minus ordinary and necessary business expenses. Sole proprietors and single-member LLCs figure this on Schedule C, and the net profit flows to Schedule SE.⁵

Multiply that net profit by 0.9235. This 92.35% adjustment is what puts you on roughly equal footing with a W-2 worker, who doesn’t pay FICA on the employer’s share of their own payroll taxes.⁶ Then apply the two rates to the result.

Here is how the math works for someone with $80,000 in net profit and no W-2 wages in 2026:

Adjusted net earnings: $80,000 × 92.35% = $73,880
Social Security portion: $73,880 × 12.4% = $9,161
Medicare portion: $73,880 × 2.9% = $2,143
Total self-employment tax: $11,304

$73,880 sits below both the $184,500 Social Security cap and the $200,000 Additional Medicare Tax threshold, so no adjustments apply. If the same person had $250,000 in net profit, only the first $184,500 of adjusted earnings would owe the 12.4% Social Security tax, and adjusted earnings above $200,000 would also owe the 0.9% surcharge.

The Half-Deduction on Your Income Tax

Once you know your total self-employment tax, you can deduct exactly half of it when figuring your adjusted gross income. The deduction goes on Schedule 1 of Form 1040 and reduces the income subject to your regular income tax.⁶ In the $80,000 example, that’s a $5,652 deduction against income for income tax purposes.

This deduction does not lower the self-employment tax itself. You still owe the full $11,304 to fund Social Security and Medicare. It also does not require itemizing.

One thing that does not lower your self-employment tax: the self-employed health insurance deduction. Premiums you pay for yourself and your family come off your income for income tax purposes only. Your Schedule SE calculation still starts from the full Schedule C net profit.⁷

When You Also Have W-2 Wages

If you hold a regular job alongside your self-employment, your W-2 wages count toward the $184,500 Social Security cap first. Your self-employment income fills whatever room is left. If your employer pays you $150,000 in 2026 wages and your adjusted self-employment earnings are $60,000, only $34,500 of the self-employment side owes the 12.4% Social Security tax, because your wages already used $150,000 of the cap.³

The 2.9% Medicare tax still applies to all of your adjusted self-employment earnings since Medicare has no cap. You don’t pay self-employment tax on the wages themselves; your employer already withheld the employee share of FICA.⁸

For the Additional Medicare Tax, the IRS combines earnings from all sources. Wages plus self-employment income above your filing-status threshold owe the extra 0.9%.⁴

Paying It Through the Year

Nobody withholds tax from your self-employment income, so the IRS expects quarterly estimated payments covering both your income tax and your self-employment tax. The 2026 deadlines are:⁹

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 15, 2027, payment if you file your return and pay in full by February 1, 2027. Payments can go through IRS Direct Pay, EFTPS, or by mail with a Form 1040-ES voucher.¹⁰

Avoiding the Underpayment Penalty

Fall short during the year and the IRS charges interest on the shortfall. As of early 2026 that rate is 7% per year, accruing from each quarterly due date until you pay, even if your final return shows a refund.¹¹

You avoid the penalty entirely by meeting one of these safe harbors:¹⁰

Owe less than $1,000 after subtracting withholding and credits
Pay at least 90% of your current-year tax through estimated payments
Pay at least 100% of the total tax on your prior-year return

Higher earners need more. If your prior-year adjusted gross income topped $150,000 ($75,000 if married filing separately), the prior-year safe harbor requires 110%, not 100%.¹² If a penalty does apply, it’s calculated on Form 2210 and filed with your return.

Filing the Tax

You report self-employment tax on Schedule SE, attached to Form 1040. Net profit from Schedule C, or your share of partnership income from Schedule K-1, feeds into Schedule SE, where you apply the 92.35% adjustment and the two rates. The result carries to Schedule 2 of Form 1040 and gets added to your income tax.¹³ Spouses each file their own Schedule SE if both have self-employment income.⁸

One narrow exit exists. Members of recognized religious groups that have provided for their dependent members since before 1951 and are conscientiously opposed to public and private insurance can apply for an exemption using Form 4029; ministers and members of religious orders use Form 4361. Approval requires waiving all Social Security and Medicare benefits, and you write “Exempt—Form 4029” on the self-employment tax line of your return.¹⁴

1
Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax
2
Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
3
Social Security Administration. Contribution and Benefit Base
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Internal Revenue Service. Questions and Answers for the Additional Medicare Tax
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Internal Revenue Service. Schedule C (Form 1040)
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Internal Revenue Service. Topic No. 554, Self-Employment Tax
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Internal Revenue Service. Instructions for Form 7206
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Internal Revenue Service. Instructions for Schedule SE (Form 1040)
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Internal Revenue Service. 2026 Form 1040-ES
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Internal Revenue Service. Estimated Taxes
11
Internal Revenue Service. Quarterly Interest Rates
12
Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
13
Internal Revenue Service. About Schedule SE (Form 1040), Self-Employment Tax
14
Internal Revenue Service. Form 4029 – Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits