What is self-employment tax?
When you work for an employer, you pay 7.65% for Social Security and Medicare and your employer pays the other 7.65%. When you're self-employed, you pay both halves — 15.3% in total. This is self-employment (SE) tax, and it's charged on top of regular income tax.
SE tax = (Net profit × 92.35%) × 15.3%
How it's calculated
- Only 92.35% of your net profit is taxed. This mirrors the employer's share that an employee never sees.
- Social Security (12.4%) applies up to the 2026 wage base of $184,500, reduced by any W-2 wages you earned.
- Medicare (2.9%) applies to all earnings, plus 0.9% above $200,000 ($250,000 if married filing jointly).
- You can deduct half of your SE tax when figuring your income tax.
- If your net SE earnings are under $400, you don't owe SE tax.
Example
A freelancer with $60,000 in net profit owes about $8,478 in self-employment tax, and can deduct about $4,239 of it from their taxable income.
How to lower your self-employment tax
- Track every business expense — software, equipment, mileage, a home office — since SE tax is charged on profit, not revenue.
- Consider an S corporation once profits are consistently high; you can pay yourself a reasonable salary and take the rest as distributions. Talk to a tax professional first.
- Pay quarterly estimated taxes to avoid IRS underpayment penalties.
Frequently asked questions
How much should I set aside for taxes as a freelancer?
Many freelancers set aside 25–30% of profit to cover self-employment tax plus federal and state income tax. Use this calculator for the SE part and your tax bracket for the rest.
Do I have to pay self-employment tax if I also have a job?
Yes, on your self-employment profit. However, your W-2 wages count toward the Social Security cap, so high earners may pay less Social Security on side income.
When are quarterly estimated taxes due?
April 15, June 15, September 15 and January 15 of the following year. If a date falls on a weekend or holiday, it moves to the next business day.
Is self-employment tax the same as income tax?
No. SE tax covers Social Security and Medicare. Income tax is calculated separately based on your total taxable income and tax bracket.
Related calculators
Last updated .