What is the self-employment tax rate in 2026?

The self-employment tax rate in 2026 is 15.3 percent on the first $168,600 of net self-employment earnings. That is 12.4 percent for Social Security plus 2.9 percent for Medicare. Above the Social Security wage base, only the 2.9 percent Medicare portion applies, and an additional 0.9 percent Medicare surtax kicks in above $200,000 for single filers and $250,000 for married filing jointly.

Do I pay self-employment tax on my gross income or my net income?

You pay self-employment tax on your net earnings from self-employment, not your gross. Net earnings equal your gross business income minus your allowable business expenses. Then a further adjustment is applied: you multiply that net figure by 92.35 percent before applying the 15.3 percent SE tax rate. This adjustment represents the employer-half of FICA that a W-2 employee would never owe.

Is half of my self-employment tax deductible?

Yes. You can deduct one-half of your self-employment tax as an above-the-line adjustment to income on your Form 1040. This deduction lowers your adjusted gross income and therefore your federal income tax, but it does not lower the SE tax itself. It is purely an income-tax deduction.

When do I have to pay self-employment tax?

Self-employment tax is not withheld from your checks, so the IRS requires you to send it in quarterly as part of estimated tax payments. The 2026 quarterly deadlines are April 15, 2026, June 16, 2026, September 15, 2026, and January 15, 2027. If you owe less than $1,000 for the year you can pay all of it at tax time, but most freelancers earning meaningful income will need to make quarterly payments.

Do I owe self-employment tax if I only earned a little on the side?

You owe self-employment tax once your net self-employment earnings for the year reach $400 or more. Below $400, you do not owe SE tax on that income, though you may still owe regular income tax on it depending on your total situation.

C-Corp vs S-Corp Tax Calculator: Which Structure Saves You More?

Choosing between a C-Corp and an S-Corp isn't just a legal formality — it's a tax decision that can mean thousands of dollars of difference every year. The core issue is double taxation: a C-Corp pays corporate income tax on its profits, and then shareholders pay personal income tax again on any dividends distributed. An S-Corp sidesteps that second layer by passing profits directly to your personal return. But C-Corps also have a flat 21% rate, access to certain deductions S-Corps can't use, and more flexibility with investors — so the math isn't always obvious. Use this calculator to compare your real numbers, then read the breakdown below to understand what's actually driving the difference.

How the Calculator Works

The calculator asks for three core inputs and produces a side-by-side tax liability estimate for each entity type:

Net business profit — your total revenue minus operating expenses, before any owner compensation.
Reasonable owner salary — the W-2 wage you would pay yourself as a shareholder-employee. This matters for both structures because S-Corp owners must take a reasonable salary before taking distributions, and in a C-Corp it's a deductible expense.
Dividend or distribution amount — how much of the remaining profit you plan to take out of the company (versus retaining in the business).

From those inputs the tool calculates:

For the C-Corp: corporate tax at the current flat 21% rate on taxable income after your deductible salary, then qualified dividend tax (typically 0%, 15%, or 20% depending on your income) on whatever you distribute to yourself.
For the S-Corp: employment taxes on your W-2 salary, then ordinary income tax on pass-through distributions at your marginal federal rate — but no second layer of corporate tax.

The result shows total tax cost for each path so you can compare them directly. Always confirm outputs with a CPA before making a formal election.

The Double Taxation Problem — and When It Actually Hurts

Double taxation sounds devastating on paper, but its real-world impact depends heavily on what you do with profits. If you plan to retain most earnings inside the company to fund growth, equipment purchases, or future hiring, those retained profits are only taxed once at the 21% corporate rate — which is lower than most individual marginal rates above roughly $95,000 in taxable income. The second tax only hits when money leaves the company as a dividend.

Double taxation bites hardest when you:

Need to pull out most or all of the profit each year as personal income.
Operate a services business with few capital reinvestment needs.
Have taxable income in the 22%–24% bracket or higher (meaning your combined C-Corp rate could exceed 35%).

It hurts least — or even becomes an advantage — when you:

Actively reinvest profits in the business and can defer dividend distributions for years.
Anticipate a future sale of the company where qualified small business stock (QSBS) exclusions under Section 1202 could shelter significant gains. QSBS is only available to C-Corp shareholders, not S-Corp owners.
Want to offer multiple classes of stock to investors or venture capital, which S-Corps cannot do.

S-Corp Advantages: Pass-Through and Payroll Tax Savings

The S-Corp's main tax benefit is that distributions above your reasonable salary are not subject to self-employment or FICA taxes. At a combined 15.3% on the first ~$168,600 of earned income (12.4% Social Security + 2.9% Medicare, with the employer half deductible), this adds up fast. A freelancer or consultant netting $200,000 who pays themselves a $80,000 salary could shelter roughly $120,000 in distributions from payroll tax — a potential saving of several thousand dollars annually compared to a sole proprietorship or single-member LLC taxed the same way.

Other S-Corp advantages relevant to the comparison:

Simpler pass-through reporting — income flows to your Schedule K-1 and onto your personal 1040; no separate corporate return beyond Form 1120-S.
Built-in losses pass through immediately, which matters in early years when you may need personal deductions.
No accumulated earnings tax risk, a penalty the IRS can assess against C-Corps that retain excess earnings without a business purpose.

The S-Corp does have restrictions: a maximum of 100 shareholders, shareholders must be U.S. citizens or resident aliens, and only one class of stock is permitted.

C-Corp Advantages Beyond the 21% Rate

The C-Corp's 21% flat corporate rate is genuinely competitive for high earners, but the structure also unlocks deductions and benefits unavailable to pass-through entities:

Section 1202 QSBS exclusion — qualifying shareholders who hold C-Corp stock for more than five years may exclude up to $10 million (or 10× their basis) in capital gains from federal tax at exit. For founders planning an eventual sale, this can dwarf annual tax savings from an S-Corp.
Broader fringe benefits — C-Corps can deduct 100% of health insurance, group-term life, and certain other benefits for shareholder-employees without the limitations S-Corps impose on 2%-or-more owners.
Flexible equity compensation — incentive stock options (ISOs) and multiple share classes make it easier to attract employees and investors, which is why virtually all VC-backed startups use a C-Corp.
Net operating loss carryforwards — C-Corp NOLs can offset future corporate income indefinitely (subject to 80% limitation), which can be strategically valuable.

For a solo freelancer who needs maximum current cash flow and has no near-term exit or investor plans, these advantages often go unused. For a growing product or tech company, they can be decisive.

A Quick Comparison Example

Assume a consultant nets $250,000 in profit, pays themselves a $100,000 W-2 salary, and plans to distribute the remaining $150,000. Here's a simplified federal-only comparison at a 24% marginal rate:

S-Corp path: Payroll taxes on $100,000 salary (~$15,300, split between employer/employee), income tax on $100,000 salary plus $150,000 distribution at ordinary rates — but no second-layer tax on distributions. Total federal tax burden is primarily ordinary income tax plus FICA on the salary portion only.
C-Corp path: Corporate tax at 21% on $150,000 remaining after the deductible $100,000 salary = $31,500 corporate tax. Then qualified dividend tax at 15% on the $118,500 remaining after corporate tax ≈ $17,775. Plus ordinary income tax on the $100,000 W-2. Total tax exceeds the S-Corp scenario in this case by roughly $10,000–$15,000 depending on exact personal rates.

If that same consultant retained the $150,000 and paid no dividend, the C-Corp owes only 21% corporate tax on it — potentially advantageous. Run your own numbers in the calculator above to see which scenario fits your actual distribution plans.

Frequently asked questions

Can I switch from a C-Corp to an S-Corp later if I change my mind?

Yes, but the conversion has tax consequences worth understanding. When a C-Corp converts to an S-Corp, it enters a five-year built-in gains (BIG) recognition period during which the IRS can tax gains on assets that appreciated while the company was a C-Corp. Timing the conversion and structuring it correctly usually requires guidance from a tax advisor.

Does the calculator account for state taxes?

The calculator focuses on federal income tax to give a clean apples-to-apples comparison. State treatment varies significantly — some states like California levy an additional franchise tax on S-Corps, while others conform closely to federal rules. Factor your state's rates in separately or discuss with a local CPA.

What counts as a 'reasonable salary' for S-Corp purposes?

The IRS requires S-Corp owner-employees to pay themselves a salary comparable to what the business would pay an unrelated person to do the same work. There's no fixed formula, but the IRS looks at industry pay data, the hours you work, and your company's revenue. Setting your salary artificially low to maximize distributions is a known audit trigger.

Is a C-Corp ever better for a solo freelancer or consultant?

Rarely, if the goal is minimizing current-year taxes and the owner needs most profits as personal income. The main exception is a consultant who plans to build and sell a product or services company and wants to qualify for the Section 1202 QSBS capital gains exclusion, which can only be accessed through a C-Corp. In that scenario, accepting some annual tax cost can pay off substantially at exit.

How do I formally elect S-Corp status?

You file IRS Form 2553 with the IRS, signed by all shareholders. To have the election apply to the current tax year, the form must generally be filed by March 15 for calendar-year corporations, or within two months and fifteen days of the start of the tax year you want it to take effect. Late election relief is available in some circumstances.

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