By Blim · Last updated: October 7, 2026 · Sources: IRS.gov, SSA.gov
The short answer: self-employment tax is the Social Security and Medicare tax you pay when you work for yourself. In 2026 it’s 15.3% of most of your net self-employment earnings: 12.4% for Social Security (on the first $184,500) and 2.9% for Medicare (no cap). You owe it if your net earnings are $400 or more, on top of regular income tax. Half of it is deductible.
If you’re new to freelancing, start with our guide on how to pay taxes as a freelancer. This article goes deep on the self-employment part: the rates, the exact calculation, real examples and legal ways to lower it.
What is self-employment tax?
When you’re an employee, your employer withholds 7.65% of your pay for Social Security and Medicare and pays another 7.65% on your behalf. When you work for yourself, there’s no employer, so you pay both halves. That combined 15.3% is the self-employment (SE) tax (IRS).
It isn’t an extra penalty for being self-employed. It funds the same Social Security retirement and Medicare benefits employees earn, and it counts toward your future Social Security benefits.
Who has to pay it?
You must pay self-employment tax and file Schedule SE with your Form 1040 if your net earnings from self-employment are $400 or more for the year (IRS). That includes:
- Freelancers and independent contractors paid on a 1099
- Gig workers (rideshare, delivery, shopping apps)
- Sole proprietors and single-member LLC owners
- Creators and online sellers running a business
The rule applies at any age, even if you already receive Social Security or Medicare, and whether or not you receive a 1099 form.
2026 self-employment tax rates and limits
| Item | 2026 figure | Source |
|---|---|---|
| Total SE tax rate | 15.3% | IRS |
| Social Security part | 12.4%, on the first $184,500 of combined wages and SE earnings | SSA |
| Medicare part | 2.9%, no limit | IRS |
| Additional Medicare Tax | 0.9% above $200,000 (single) or $250,000 (married filing jointly) | IRS |
| Minimum to owe SE tax | $400 in net earnings | IRS |
| Maximum Social Security part | $22,878 (12.4% × $184,500) | Calculated from SSA figure |
The Social Security wage base was $176,100 in 2025 and rises to $184,500 in 2026 (SSA).
How to calculate self-employment tax (step by step)
- Find your net profit. Take your total self-employment income and subtract your business expenses. Sole proprietors and independent contractors generally do this on Schedule C. If you invoiced $70,000 and had $10,000 in expenses, your net profit is $60,000.
- Multiply by 92.35%. You don’t pay SE tax on 100% of your profit. Schedule SE has you multiply it by 92.35% first, which mirrors the employer half of payroll taxes that employees never see. The result is your net earnings from self-employment.
- Apply 12.4% for Social Security, on net earnings up to $184,500 in 2026 (minus any W-2 wages that already counted toward that limit).
- Apply 2.9% for Medicare on all of your net earnings.
- Add them together. That’s your self-employment tax, reported on Schedule SE.
- Deduct half of it. You can deduct the employer-equivalent half of your SE tax when figuring your adjusted gross income. That lowers your income tax, not the SE tax itself (IRS).
In short, for most freelancers earning under the wage base:
SE tax = net profit × 0.9235 × 0.153
That works out to about 14.1% of your net profit.
Examples: self-employment tax at different income levels (2026)
All examples assume a single filer with no W-2 wages.
| Net profit | Net SE earnings (× 92.35%) | Self-employment tax | Deductible half |
|---|---|---|---|
| $30,000 | $27,705 | $4,239 | $2,119 |
| $60,000 | $55,410 | $8,478 | $4,239 |
| $120,000 | $110,820 | $16,955 | $8,478 |
| $250,000 | $230,875 | $29,573 | $14,787 |
How the $250,000 example works: net SE earnings of $230,875 are above the $184,500 Social Security cap. So Social Security tax is 12.4% × $184,500 = $22,878, and Medicare is 2.9% × $230,875 = $6,695, for a total of $29,573. Above the threshold, this freelancer also owes the 0.9% Additional Medicare Tax, figured separately on Form 8959: about $278 on the $30,875 of earnings over $200,000.
Remember: these amounts are in addition to federal income tax and any state income tax.
If you have a W-2 job and freelance on the side
The $184,500 Social Security limit applies to your combined W-2 wages and self-employment earnings. Your W-2 wages count toward the limit first (IRS):
- If your W-2 wages are already $184,500 or more, you don’t pay the 12.4% Social Security part on your freelance earnings. You still pay the 2.9% Medicare part.
- If your W-2 wages are below the limit, only the gap between your wages and $184,500 is subject to the 12.4% part.
Example: you earn $150,000 at a W-2 job and $50,000 in net SE earnings. Only $34,500 of your SE earnings ($184,500 − $150,000) is subject to the 12.4% Social Security part. All $50,000 is subject to Medicare.
How to pay self-employment tax
Nobody withholds SE tax from your freelance income, so you pay it yourself in two places:
- During the year, through quarterly estimated taxes. Your estimated payments cover both income tax and SE tax. If you expect to owe $1,000 or more for the year, you generally need to make them (IRS). Our guide on how to pay taxes as a freelancer covers the 2026 deadlines and how to pay online.
- When you file, on Schedule SE with your Form 1040. That’s where the final number is calculated and matched against what you already paid.
You need a Social Security number or an ITIN to pay self-employment tax (IRS).
Legal ways to lower your self-employment tax
- Claim every legitimate business expense. SE tax is based on net profit, so each deductible expense (software, equipment, a home office, business mileage, professional services) lowers both your SE tax and your income tax.
- Keep good records. Undocumented expenses are deductions you can’t defend. Use a separate business bank account and save receipts.
- Understand what doesn’t reduce it. Contributions to your own SEP IRA or Solo 401(k), and the deduction for half of your SE tax, lower your income tax but not your self-employment tax.
- Consider an S corporation only with professional advice. Some higher-earning freelancers elect S corp status and pay themselves a reasonable salary. This can reduce payroll taxes, but it adds payroll, bookkeeping and filing costs. Talk to a CPA or Enrolled Agent before doing it.
Common mistakes
- Forgetting SE tax exists. Budgeting only for income tax leaves you about 14% of your profit short.
- Calculating it on gross income. It’s based on net profit after expenses, multiplied by 92.35%.
- Thinking an LLC removes it. A single-member LLC is taxed like a sole proprietorship by default, so SE tax still applies.
- Assuming no 1099 means no tax. Self-employment income is taxable whether or not a client sends a form.
FAQ
What is the self-employment tax rate for 2026? 15.3% of net earnings from self-employment: 12.4% for Social Security on the first $184,500 and 2.9% for Medicare on everything. An extra 0.9% Medicare tax applies above $200,000 for single filers.
Do I pay self-employment tax if I made less than $400? No. You only owe SE tax when your net earnings from self-employment are $400 or more. You may still owe income tax depending on your total income.
Is self-employment tax the same as income tax? No. SE tax covers Social Security and Medicare. Income tax is separate and depends on your tax bracket. Most freelancers owe both.
Can I deduct self-employment tax? You can deduct the employer-equivalent half of it when figuring your adjusted gross income. That reduces your income tax, not the SE tax itself.
Does self-employment tax count toward Social Security benefits? Yes. The Social Security part of SE tax builds your earnings record, the same way payroll taxes do for employees.
Sources
- IRS — Self-employment tax (Social Security and Medicare taxes)
- IRS — About Schedule SE (Form 1040)
- IRS — About Form 8959, Additional Medicare Tax
- IRS — Estimated taxes
- SSA — Contribution and Benefit Base
This article provides general information for the 2026 tax year and is not tax, legal or financial advice. Tax rules change and your situation may differ. Consult a qualified tax professional before making decisions.