Self-Employment Tax: Rate, Calculation and Examples (2026)
Self-employment tax for 2026: the 15.3% rate, the 92.35% rule, the $184,500 wage base, how to deduct half and worked examples you can follow line by line.
Quick answer: Self-employment tax is 15.3% (12.4% Social Security plus 2.9% Medicare) on 92.35% of your net self-employment profit. For 2026, the Social Security part applies only up to a $184,500 wage base; Medicare has no cap. You owe it once net earnings reach $400, and you can deduct half when figuring adjusted gross income.
When you work for an employer, Social Security and Medicare taxes are split: you pay half through payroll and the employer pays the other half. When you work for yourself, you pay both halves. That combined charge is self-employment tax, and for many freelancers it is a bigger bill than federal income tax in their first years, because it starts on almost the first dollar of profit with no standard deduction to soften it.
This guide explains how the tax is calculated in 2026, with three worked examples, the half deduction, how it interacts with a W-2 job, and how to pay it on time. It is general information, not tax advice. Figures come from IRS Topic 554 on self-employment tax and the Social Security Administration's 2026 fact sheet; check both for any updates before you file.
What is self-employment tax?
Self-employment tax (often shortened to SE tax) is the Social Security and Medicare tax paid by people who work for themselves. It funds the same programs as the FICA tax on employees' paychecks, and paying it earns you Social Security credits toward retirement and disability benefits.
You generally owe it if you are a sole proprietor, an independent contractor, a member of a partnership or LLC taxed as a partnership who carries on a trade or business, or a single-member LLC owner taxed as a disregarded entity. You calculate it on Schedule SE (Form 1040) and file it with your income tax return. The profit figure it starts from comes from Schedule C; our guide to Schedule C for freelancers explains how to arrive at that number.
Self-employment tax rate and 2026 figures
| Component | Rate | Applies to | 2026 limit |
|---|---|---|---|
| Social Security (OASDI) | 12.4% | Net earnings from self-employment | Up to $184,500, combined with W-2 wages |
| Medicare (HI) | 2.9% | All net earnings from self-employment | No cap |
| Total SE tax | 15.3% | Up to the wage base; 2.9% above it | Max Social Security part: $22,878 |
| Additional Medicare Tax | 0.9% | Earnings above $200,000 (single), $250,000 (married filing jointly), $125,000 (married filing separately) | Calculated on Form 8959 |
The 2026 wage base of $184,500 is up from $176,100 in 2025, and the SSA has announced $192,300 for 2027. The maximum Social Security portion for 2026 is $184,500 x 12.4% = $22,878.
How to calculate self-employment tax, step by step
- Find your net profit. Start with Schedule C line 31 (or your share of partnership earnings). If you have more than one business, combine the profits and losses.
- Multiply by 92.35%. This gives your net earnings from self-employment. The 7.65% reduction mirrors the employer half of FICA, which employees never count as wages.
- Check the $400 threshold. If the result is under $400, you generally owe no SE tax.
- Apply 12.4% up to the wage base. Subtract any W-2 Social Security wages from $184,500 first; apply 12.4% to the lower of your net earnings or what remains of the base.
- Apply 2.9% to all net earnings. Medicare has no ceiling.
- Add the two parts. That is your SE tax for Schedule 2.
- Deduct half. Take 50% of the total as an adjustment to income on Schedule 1.
Worked examples of self-employment tax
All numbers below are illustrative and assume a single filer in 2026 with no W-2 wages unless stated.
Example 1: freelancer with $60,000 profit
- Net earnings: $60,000 x 0.9235 = $55,410.00
- Social Security: $55,410.00 x 12.4% = $6,870.84
- Medicare: $55,410.00 x 2.9% = $1,606.89
- SE tax: $6,870.84 + $1,606.89 = $8,477.73
- Deductible half: $8,477.73 / 2 = $4,238.87 (rounded)
The effective rate on the $60,000 profit is $8,477.73 / $60,000 = about 14.1%, not 15.3%, because of the 92.35% step.
Example 2: consultant with $250,000 profit
- Net earnings: $250,000 x 0.9235 = $230,875.00
- Social Security, capped at the base: $184,500 x 12.4% = $22,878.00
- Medicare on everything: $230,875.00 x 2.9% = $6,695.38
- SE tax: $22,878.00 + $6,695.38 = $29,573.38
- Additional Medicare Tax: ($230,875.00 - $200,000) x 0.9% = $277.88, reported on Form 8959
The Additional Medicare Tax is not part of the half deduction. Only the $29,573.38 counts, giving a $14,786.69 adjustment.
Example 3: side business with a W-2 job
Priya earns $150,000 in W-2 wages and has $50,000 of freelance profit.
- Net earnings: $50,000 x 0.9235 = $46,175.00
- Remaining wage base: $184,500 - $150,000 = $34,500
- Social Security: $34,500 x 12.4% = $4,278.00 (only the remaining base is taxed)
- Medicare: $46,175.00 x 2.9% = $1,339.08
- SE tax: $4,278.00 + $1,339.08 = $5,617.08
Without the job, the same $50,000 would cost $46,175.00 x 15.3% = $7,064.78. Combined wages and self-employment earnings of $196,175 also stay under the $200,000 Additional Medicare threshold for a single filer.
SE tax vs employee FICA
It helps to compare the SE tax rate with what an employee pays. An employee earning $55,410 in wages pays 7.65% through payroll, which is $55,410 x 7.65% = $4,238.87, and the employer pays the same again on top of the salary. A freelancer with $55,410 of net earnings from self-employment pays both halves, $8,477.73, but gets the 92.35% adjustment and the half deduction to roughly match the employee's position.
| Item | Employee (W-2) | Self-employed |
|---|---|---|
| Social Security rate paid by the worker | 6.2% | 12.4% |
| Medicare rate paid by the worker | 1.45% | 2.9% |
| Employer share | Paid by the employer | Paid by you |
| How it is collected | Payroll withholding | Estimated payments and Schedule SE |
| Offset | Employer share is not taxable income | 92.35% rule and deduction for half |
The practical difference is cash flow rather than the rate. Nobody withholds the tax for you, so the money has to be set aside from each payment. It also explains why a freelance rate needs to be noticeably higher than the equivalent salary per hour before it pays the same.
Does SE tax count toward Social Security benefits?
Yes. The Social Security portion of the tax is credited to your earnings record in the same way as payroll tax on wages, and it counts toward the credits you need for retirement and disability benefits. That is one reason to report all self-employment income accurately. Underreporting profit lowers your tax today but can also reduce the benefits you qualify for later. State income taxes are separate; SE tax is a federal tax, and states do not add their own version of it.
The deduction for half of your SE tax
You can deduct 50% of your SE tax as an adjustment to income on Schedule 1 of Form 1040. In Example 1, that is $4,238.87. If the freelancer's marginal federal income tax rate were 22%, the deduction would save roughly $4,238.87 x 22% = $932.55 of income tax. It does not reduce the SE tax itself, and it does not go on Schedule C. Other expenses that lower your Schedule C profit do reduce SE tax, which is why our list of self-employed tax deductions is worth a careful read: every legitimate business expense saves roughly 14.1% in SE tax on top of income tax.
How and when to pay self-employment tax
There is no employer withholding for self-employed income, so the IRS expects you to pay as you go through estimated taxes. For 2026, the final quarterly payment is due January 15, 2027, and the return itself is due April 15, 2027. Our guide to quarterly estimated taxes for freelancers covers safe harbor rules and how to work out each payment.
A practical habit: when an invoice is paid, move a fixed share into a separate tax savings account. Many freelancers start at 25% to 30% of each payment and adjust once they see their actual bill. That is a rule of thumb, not a calculation, and your figure depends on your income, deductions and state. It also helps to build tax into your pricing from the start, which our guide on how to set freelance rates covers.
If you create invoices with our free US invoice generator, keep a copy of every PDF and note the date each one was paid. The tool builds the invoice in your browser; it does not track income, calculate tax or file anything, so that payment log is what you use when you total your income for Schedule C.
Common mistakes with self-employment tax
- Applying 15.3% to gross receipts. The tax applies to net profit, after expenses, multiplied by 92.35%.
- Forgetting the tax entirely because no 1099 arrived. Income below the 1099 thresholds, or paid through apps covered by the 1099-K threshold, is still subject to SE tax.
- Ignoring W-2 wages. If you also have a job, enter your Social Security wages on Schedule SE so you do not overpay the 12.4% part.
- Deducting half on Schedule C. It belongs on Schedule 1 as an adjustment, not as a business expense.
- Waiting until April. This tax is part of your estimated payments. Paying late can mean an underpayment penalty.
- Assuming an EIN or LLC changes the tax. Getting an EIN (see how to get an EIN) or forming a single-member LLC does not change the SE tax on its own. Only an election such as S corporation status changes the treatment, and that comes with payroll costs. Our comparison of LLC vs sole proprietorship explains the trade-offs.
Self-employment tax checklist
- Net profit from every Schedule C (and partnership K-1) added up
- Net profit multiplied by 92.35%
- $400 threshold checked
- W-2 Social Security wages entered against the $184,500 base
- 12.4% and 2.9% parts calculated separately
- Additional Medicare Tax checked on Form 8959 if income is high
- Half of SE tax deducted on Schedule 1
- Estimated payments scheduled, with the next one by January 15, 2027
For more US and UK guides, see our tax and compliance category.
This article is general information, not tax advice. Rates, wage bases and thresholds change each year; check irs.gov and ssa.gov or speak to a qualified tax professional about your situation.
Frequently asked questions
What is the self-employment tax rate for 2026?
The rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare. It applies to 92.35% of your net profit from self-employment. The 12.4% Social Security part stops once your combined wages and self-employment earnings reach the 2026 wage base of $184,500. The 2.9% Medicare part has no cap, and an extra 0.9% Additional Medicare Tax applies above certain income levels.
Do I pay self-employment tax if I earn under $400?
Generally no. You owe self-employment tax when your net earnings from self-employment are $400 or more for the year. The test uses net earnings, after business expenses and the 92.35% adjustment, not your gross receipts. Church employees have a different, lower threshold of $108.28. You still report the income for income tax purposes even if no self-employment tax is due.
Why is self-employment tax calculated on 92.35% of profit?
Employees pay 7.65% in Social Security and Medicare tax, and their employer pays a matching 7.65% that is not counted as the employee's wages. To put self-employed people on a similar footing, the law reduces net profit by 7.65% before applying the tax. One hundred percent minus 7.65% equals 92.35%, which is the multiplier on Schedule SE.
Is self-employment tax in addition to income tax?
Yes. Self-employment tax covers Social Security and Medicare, while federal income tax is calculated separately on your taxable income. Both are paid through the same Form 1040 and estimated payments, which is why the first bill often surprises new freelancers. State income tax, where it applies, is on top. The half deduction lowers income tax but not the self-employment tax itself.
How does the deduction for half of self-employment tax work?
You deduct 50% of your self-employment tax as an adjustment to income on Schedule 1 of Form 1040. It reduces your adjusted gross income and therefore your income tax, whether or not you itemize. It does not reduce the self-employment tax itself, and it is not a Schedule C business expense. For example, $9,000 of self-employment tax gives a $4,500 adjustment.
Does having a W-2 job reduce my self-employment tax?
It can, but only for high earners. Social Security wages from a job count toward the same $184,500 wage base in 2026. If your W-2 wages already reach the base, you owe only the 2.9% Medicare part on your self-employment earnings. If wages are below it, the 12.4% applies to self-employment earnings until the combined total reaches the base. Schedule SE handles the calculation.
Can an LLC or S corporation avoid self-employment tax?
A single-member LLC taxed as a sole proprietorship pays self-employment tax exactly as a sole proprietor does. An LLC or corporation that elects S corporation status pays the owner a reasonable salary subject to payroll tax, and profit distributions above that are not subject to self-employment tax. The salary must be reasonable for the work, and payroll adds costs, so get professional advice first.
When do I pay self-employment tax?
Through quarterly estimated tax payments during the year, together with income tax, and then any balance with your return. For 2026, the remaining estimated payment is due January 15, 2027, and the return is due April 15, 2027. Paying too little during the year can trigger an underpayment penalty, even if you pay the full balance when you file.
What is the Social Security wage base for 2027?
The Social Security Administration has announced that the maximum taxable earnings will rise to $192,300 for 2027, up from $184,500 in 2026. That figure will apply to self-employment earnings for the 2027 tax year, which you report on returns filed in 2028. Medicare tax remains uncapped. Check ssa.gov for the official figure before relying on it in your planning.
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Guides on invoicing, cash flow and small-business finance from Invoice Creator, operated by Next Software Development Company. Content is reviewed for accuracy against the fields our own invoice generator produces.
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