How Self-Employment Tax Is Worked Out
When you have a job, your employer quietly pays half of your Social Security and Medicare and takes the other half out of your paycheck. Work for yourself and you're both people, so you pay the full 15.3%: 12.4% for Social Security and 2.9% for Medicare[1]. The IRS calls it self-employment tax, and it's due on top of income tax.
There's a small break built in. You don't pay it on all of your profit, only on 92.35% of it. That's the "regular method" in IRS Publication 334, and it's line 4a of Schedule SE[2]. If that number comes to less than $400, you don't owe SE tax at all[1].
Two caps change the math for higher earners. The Social Security part stops once your combined wages and net earnings reach the yearly limit: $184,500 for 2026 and $192,300 for 2027[2][3]. Medicare has no cap. A W-2 job counts toward that limit first, so if you have a salary and a side business, part or all of your side income may skip the 12.4%[1].
A Worked Example
Say you're a freelance designer who invoiced $78,000 this year and spent $18,000 on software, a laptop and a coworking desk. Your net profit is $60,000.
Multiply by 92.35% and your net earnings from self-employment are $55,410. Social Security is 12.4% of that, $6,870.84. Medicare is 2.9%, $1,606.89. Add them and you owe $8,477.73 in self-employment tax, about 14.1% of your profit. Half of it, about $4,239, comes off your income when you work out adjusted gross income, which trims your income tax but not the SE tax itself[1].
Spread over four estimated payments, that's roughly $2,119 a quarter, or about $706 a month you shouldn't think of as yours. And that's before a cent of income tax.
More Examples
| Situation | Net SE earnings | Social Security | Medicare | SE tax | Deductible half | Additional Medicare | SE tax ÷ profit |
|---|---|---|---|---|---|---|---|
| $30,000 profit, no W-2 job | $27,705 | $3,435 | $803 | $4,239 | $2,119 | $0 | 14.1% |
| $60,000 profit, no W-2 job | $55,410 | $6,871 | $1,607 | $8,478 | $4,239 | $0 | 14.1% |
| $50,000 side business + $150,000 W-2 salary | $46,175 | $4,278 | $1,339 | $5,617 | $2,809 | $0 | 11.2% |
| $200,000 profit, no W-2 job | $184,700 | $22,878 | $5,356 | $28,234 | $14,117 | $0 | 14.1% |
| $250,000 profit, joint return, spouse earns $100,000 in W-2 wages | $230,875 | $22,878 | $6,695 | $29,573 | $14,787 | $728 | 11.8% |
Look at the side-business row. Because the $150,000 salary already used most of the $184,500 cap, only $34,500 of the side income pays the 12.4%, so the effective rate drops to about 11.2%. At $200,000 of profit with no job, net earnings of $184,700 sit just $200 over the cap, so it barely bites; push profit higher and the effective rate starts to fall. The last row shows the 0.9% Additional Medicare Tax kicking in: on a joint return the $250,000 threshold is reduced by the spouse's $100,000 of wages, leaving $150,000, and the tax applies to net earnings above that[4].
Paying It Through the Year
Nobody withholds SE tax for you, so it usually goes in with your quarterly estimated payments[1]. You generally need to make them if you expect to owe $1,000 or more when you file[5]. For 2026 income the due dates are April 15, June 15 and September 15, 2026, then January 15, 2027[5]. The periods aren't equal quarters, which catches a lot of people out the first year.
The quarterly figure above is only the SE tax share. Your actual payment also needs to cover income tax, and that depends on your deductions, credits and state. A tax pro can work that out properly; here's what tax preparation costs if you're weighing it up.
Where to Go Next
For the full background, with screenshots of the IRS and SSA pages, read our self-employment tax guide. If you're setting prices, the Freelance Hourly Rate Calculator builds a tax set-aside into your rate, and how to set a freelance hourly rate walks through it. Every legitimate business expense lowers the profit this tax is charged on, so it pays to know your software stack cost and to track it in decent cloud accounting software or invoicing software. Thinking about hiring instead of staying solo? The Employee Cost Calculator shows the employer side of the same 7.65%.
Frequently Asked Questions
How much self-employment tax will I pay on $60,000?
About $8,478 for 2026, assuming no W-2 wages: $60,000 × 92.35% = $55,410, then × 15.3%. You can deduct half of it, about $4,239, when figuring adjusted gross income. Income tax is separate.
What is the self-employment tax rate for 2026?
15.3% (12.4% Social Security plus 2.9% Medicare) on 92.35% of net self-employment earnings. The Social Security part only applies up to $184,500 of combined wages and net earnings in 2026.
Does a W-2 job reduce my self-employment tax?
It can. Wages that already had Social Security tax withheld count toward the yearly cap first, so less of your self-employment income is left for the 12.4% part. The 2.9% Medicare part still applies to all of it.
Do I owe self-employment tax if I made less than $400?
No. You owe SE tax and file Schedule SE only when net earnings from self-employment are $400 or more. Church employee income has a lower threshold.
Is the Additional Medicare Tax part of self-employment tax?
No. The 0.9% Additional Medicare Tax is figured on Form 8959, not Schedule SE, and it isn't included in the deductible half. It applies to wages and self-employment income above $200,000 (single, head of household), $250,000 (married filing jointly) or $125,000 (married filing separately).
Does this include income tax?
No. It covers Social Security and Medicare only. Federal and state income tax depend on your deductions, credits and filing status, so your quarterly payments need to be higher than the SE tax share shown here.
Sources
Rates, caps and thresholds come from the IRS and the Social Security Administration. Tax rules change and have exceptions (church employees, farm income, non-calendar tax years, the optional methods), so confirm on IRS.gov for the year you're filing. See our methodology and editorial policy. General information only, not tax advice.
- [1] IRS: Self-employment tax (Social Security and Medicare taxes): https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes (checked 18 Oct 2026)
- [2] IRS Publication 334, Tax Guide for Small Business (regular method, 92.35%; What's New for 2026): https://www.irs.gov/publications/p334 (checked 18 Oct 2026)
- [3] SSA: Contribution and benefit base (2026 and 2027): https://www.ssa.gov/oact/cola/cbb.html (checked 18 Oct 2026)
- [4] IRS: Questions and answers for the Additional Medicare Tax: https://www.irs.gov/businesses/small-businesses-self-employed/questions-and-answers-for-the-additional-medicare-tax (checked 18 Oct 2026)
- [5] IRS: Estimated tax FAQs (due dates): https://www.irs.gov/faqs/estimated-tax (checked 18 Oct 2026)