The self-employment tax rate is 15.3% of your net earnings from self-employment: 12.4% for Social Security and 2.9% for Medicare. You owe it once your net self-employment income reaches $400 or more in a year, and you report and pay it by filing Schedule SE with your Form 1040. Regular employees split these contributions with their employer; when you work for yourself, you cover both halves.1Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
How the 15.3% Breaks Down
Two separate programs sit inside the single rate. The 12.4% Social Security portion applies only up to an annual wage base. For 2026, that base is $184,500.2Social Security Administration. Contribution and Benefit Base Net self-employment earnings above the base are not subject to the Social Security portion, but the 2.9% Medicare portion has no ceiling and applies to every dollar of net earnings.
An example makes the split concrete. If your net earnings are $200,000, you pay the full 15.3% on the first $184,500 and 2.9% on the remaining $15,500.1Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
Additional Medicare Tax at Higher Incomes
An extra 0.9% Medicare surtax kicks in once your self-employment income passes a threshold set by filing status:3Internal Revenue Service. Topic No. 560, Additional Medicare Tax
- Single or head of household: $200,000
- Married filing jointly: $250,000
- Married filing separately: $125,000
The surtax hits only the earnings above the threshold, not your whole income. On that portion, the total Medicare rate becomes 3.8%.4Internal Revenue Service. Questions and Answers for the Additional Medicare Tax
Who Owes Self-Employment Tax
You owe self-employment tax when your net earnings from a trade or business are $400 or more in the year.5Internal Revenue Service. Topic No. 554, Self-Employment Tax It applies whether the work is full-time or a side gig, and it reaches sole proprietors, independent contractors, freelancers, gig workers, and partners in a partnership that carries on a trade or business.
The tax is tied to earned business income. Investment income such as dividends, interest, and capital gains generally does not trigger self-employment tax, and rental income usually does not either. The formal name is SECA (Self-Employed Contributions Act), the self-employed counterpart to the FICA taxes employers withhold from paychecks.6Social Security Administration. What Are FICA and SECA Taxes?
Calculating What You Owe
Start With Net Profit
Figure your net profit first: total business income minus deductible business expenses. Most sole proprietors do this on Schedule C (Form 1040), which covers expenses like supplies, advertising, and home office costs.7Internal Revenue Service. Instructions for Schedule C (Form 1040) Partnership income comes through on a Schedule K-1 instead, but it feeds the same self-employment tax calculation.
Apply the 92.35% Adjustment
Self-employment tax is not charged on 100% of net profit. Only 92.35% of your net earnings is subject to the tax.5Internal Revenue Service. Topic No. 554, Self-Employment Tax The adjustment reflects the fact that regular employees do not pay FICA on the employer’s share of the contribution. If Schedule C shows $100,000 in net profit, your taxable self-employment earnings are $92,350.
Run the Numbers on Schedule SE
Schedule SE (Form 1040) walks the calculation through. You enter adjusted net earnings, apply the 15.3% rate against the Social Security wage base of $184,500, and land on your total self-employment tax. The form also computes the deduction for half of the tax.8Internal Revenue Service. Instructions for Schedule SE (Form 1040)
Deducting Half of Your Self-Employment Tax
You can deduct half of your self-employment tax when figuring your adjusted gross income. The deduction is claimed on Schedule 1 (Form 1040), and it lowers the income on which you owe regular income tax.5Internal Revenue Service. Topic No. 554, Self-Employment Tax If your self-employment tax is $14,000, you deduct $7,000.
This is an above-the-line adjustment, so you do not need to itemize to claim it. It does not reduce the self-employment tax itself, only your income tax.1Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
The self-employed health insurance deduction works differently. It is factored into your net earnings from self-employment, which means it can reduce both your income tax and your self-employment tax.1Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
When You Also Have W-2 Wages
If you draw a paycheck from an employer and also have self-employment income, your W-2 wages count first toward the $184,500 Social Security wage base. You owe the 12.4% Social Security portion of self-employment tax only on the gap between your W-2 wages and the base. The 2.9% Medicare portion still applies to all of your net self-employment earnings.9Social Security Administration. If You Are Self-Employed
Say your W-2 wages are $100,000 and your net self-employment earnings are $85,500. Total earnings reach $185,500. You pay the full 15.3% on the first $84,500 of self-employment income (which brings combined earnings to the $184,500 base), then only 2.9% on the remaining $1,000.9Social Security Administration. If You Are Self-Employed
Paying Throughout the Year
Employees have taxes withheld each pay period. Self-employed workers usually have to send the money in themselves, quarterly. Estimated payments are required if you expect to owe $1,000 or more in total tax after withholding and refundable credits.10Internal Revenue Service. Estimated Taxes
Form 1040-ES helps you estimate the annual liability and split it into four payments. The standard due dates are:
- Income earned January 1 – March 31: due April 15
- April 1 – May 31: due June 15
- June 1 – August 31: due September 15
- September 1 – December 31: due January 15 of the following year
When a due date lands on a weekend or federal holiday, the deadline moves to the next business day.11Internal Revenue Service. How Do I Know if I Have to Make Quarterly Individual Estimated Tax Payments?
Safe Harbors That Prevent an Underpayment Penalty
Even if you fall short on estimated taxes, you avoid the underpayment penalty by meeting one of two safe harbors: pay at least 90% of what you owe for the current year, or pay at least 100% of the tax shown on last year’s return, whichever is less. If your prior-year adjusted gross income exceeded $150,000 ($75,000 for married filing separately), the prior-year safe harbor rises to 110%.12Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
You also owe no penalty if your total tax comes in under $1,000. This penalty generally cannot be waived for ordinary reasonable cause; the IRS may reduce it only in narrow situations such as a casualty, a disaster, or retirement after age 62 with a disability.12Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
How to Send the Payment
The Electronic Federal Tax Payment System (EFTPS) allows scheduled payments up to 365 days in advance and provides confirmation and history, though you have to enroll before your first use.13Internal Revenue Service. EFTPS: The Electronic Federal Tax Payment System IRS Direct Pay transfers funds from a checking or savings account with no enrollment. Debit card, credit card, and IRS Online Account payments are also available.
Where the Tax Lands on Your Return
After Schedule SE, the total self-employment tax carries to Schedule 2 (Form 1040), line 4. The half-deduction goes on Schedule 1 (Form 1040), line 15. Both schedules attach to your Form 1040.14Internal Revenue Service. 2025 Schedule SE (Form 1040)
Penalties for Filing or Paying Late
Two penalties can hit at once. The failure-to-file penalty is 5% of the unpaid tax for each month or partial month a return is late, capped at 25%. The failure-to-pay penalty is 0.5% of the unpaid tax per month, also capped at 25%.15Office of the Law Revision Counsel. 26 USC 6651 – Failure to File Tax Return or to Pay Tax
Because the filing penalty is ten times steeper than the payment penalty, filing on time — even when you cannot pay in full — sharply reduces what you owe on top of the tax. Both penalties can be waived on a showing of reasonable cause where the failure was not willful neglect. Interest runs on unpaid balances from the original due date.