Self-employment tax, explained
What the 15.3% covers, how the IRS calculates it, and a worked example you can follow line by line. Plain English, no jargon.
What is self-employment tax?
When you work for an employer, Social Security and Medicare are split: half comes out of your paycheck and your employer pays the other half. When you work for yourself, you pay both halves. That combined amount is self-employment tax. It is separate from, and in addition to, federal income tax.
12.4%
Social Security
Applies to net self-employment earnings up to the 2026 wage base of $184,500. Earnings above that are not subject to this part.
2.9%
Medicare
Applies to all net self-employment earnings, with no cap.
+0.9%
Additional Medicare
Applies only to combined earnings above $200,000 for single filers ($250,000 if married filing jointly).
How it's calculated
Start with net profit
Your business income minus your deductible business expenses, the same number that ends up on Schedule C.
Multiply by 92.35%
This mirrors how an employer's share is left out of an employee's taxable wages. The result is your net earnings from self-employment.
Apply 15.3%
12.4% for Social Security (up to the wage base) plus 2.9% for Medicare. The total is reported on Schedule SE.
Deduct half of it
Half of your self-employment tax is generally deductible as an adjustment to income. It lowers your income tax, not the self-employment tax itself.
A worked example
A single freelance designer with $60,000 in net profit for 2026 and no W-2 wages. Numbers are rounded to the cent.
| Net profit (Schedule C) | $60,000.00 |
|---|---|
| × 92.35% = net earnings from self-employment | $55,410.00 |
| × 15.3% = self-employment tax | $8,477.73 |
| Half, deductible as an adjustment to income | $4,238.87 |
| Roughly what to set aside per month for SE tax alone | $706.48 |
Income tax comes on top of this. How much depends on your filing status, deductions, and other income, which is exactly what the Tax Planner works out for you.
How you pay it
No employer is withholding it for you, so self-employment tax is usually paid during the year through quarterly estimated payments (Form 1040-ES), then reconciled on Schedule SE when you file your return.
Keep reading
Skip the spreadsheet
Bookkeeply turns the income and expenses you track into a running estimate of your self-employment tax, income tax, and quarterly payments, using current IRS figures.
- Self-employment tax, including the wage-base cap and Additional Medicare Tax
- Quarterly payment amounts based on the IRS safe-harbor rule
- Updates automatically as you log income and expenses
Free to start. No credit card required.
Common questions
Who has to pay self-employment tax?
Generally, anyone with net earnings from self-employment of $400 or more in a year, including freelancers, independent contractors, and sole proprietors. Single-member LLC owners are usually in the same position unless the LLC has elected to be taxed as a corporation.
Is self-employment tax the same as income tax?
No. Self-employment tax covers Social Security and Medicare. Income tax is calculated separately on your taxable income, and most self-employed people owe both.
Why is it calculated on 92.35% of my profit?
Employees never pay tax on their employer's half of Social Security and Medicare. Multiplying by 92.35% (100% minus 7.65%) gives self-employed people a comparable adjustment.
Does the deductible half reduce my self-employment tax?
No. It is an adjustment to income, so it lowers the income you pay income tax on. The self-employment tax itself stays the same.
What if I also have a W-2 job?
Social Security wages from a job count toward the same $184,500 wage base, so if your combined earnings go over it, less of your self-employment income is subject to the 12.4% portion. Medicare still applies to all of it.
General information, not tax advice. Bookkeeply is not a CPA firm and this page is not tax, legal, or financial advice. Figures reflect 2026 federal rules and do not cover state taxes or every situation. Talk to a licensed tax professional before making decisions for your business.