What is self-employment tax, in plain English?
If you earn money as a freelancer, a 1099 contractor, a gig driver, an Etsy seller, a consultant, or any other kind of self-employed worker, you owe a tax called self-employment tax. It's the do-it-yourself version of the Social Security and Medicare taxes that a W-2 employee and their employer split between them. Because you're both the employee and the employer when you work for yourself, you owe both halves — which is why the total rate is 15.3% instead of the 7.65% that shows up on a regular paycheck.
That 15.3% breaks down as 12.4% for Social Security and 2.9% for Medicare. It is completely separate from federal income tax; you pay this on top of whatever ordinary income tax your bracket charges. That's the single biggest shock most new freelancers get: your total federal tax bill on a dollar of self-employment income can easily land in the 30%–40% range once you stack SE tax on top of income tax.
The 2026 numbers you actually need
- SE tax rate: 15.3% on the first $168,600 of net earnings. Above that, only the 2.9% Medicare portion continues.
- Social Security wage base (2026): $168,600. Dollar #168,601 and above is exempt from the 12.4% Social Security portion.
- Additional Medicare tax: an extra 0.9% on net self-employment earnings above $200,000 (single), $250,000 (MFJ), or $125,000 (MFS).
- 92.35% reduction: before you apply the 15.3% rate, you multiply your net earnings by 0.9235. This mirrors the FICA deduction a W-2 employee wouldn't have had to pay on the employer half.
- Minimum threshold: you only owe SE tax if net earnings are $400 or more for the year.
How the calculator above actually works
Here's the step-by-step math the calculator runs. You can double-check it on a piece of paper if you want — this is the same formula the IRS uses on Schedule SE.
- Net earnings = Gross self-employment income − Business expenses.
- Taxable base = Net earnings × 92.35%. This is the 7.65% adjustment that accounts for the employer-half of FICA.
- Social Security portion = (Taxable base + any W-2 Social-Security-taxed wages you already had) capped at the $168,600 wage base, then multiplied by 12.4%. If you already hit the wage base with a day job, the 12.4% Social Security portion of your SE tax goes to zero.
- Medicare portion = Taxable base × 2.9%. There is no cap on this.
- Additional Medicare = 0.9% on the amount above your filing-status threshold ($200k single, $250k MFJ, $125k MFS).
- Total SE tax = Social Security + Medicare + Additional Medicare.
- Deductible half = Total SE tax × 50%. This comes off your income (as an above-the-line deduction on Form 1040), not off the SE tax itself. You still owe the full SE tax — the deduction just lowers your income-tax bill.
A worked example
Assume you're a single freelance web developer with $85,000 in gross 1099 income and $12,000 in legitimate business expenses. No W-2 job on the side.
- Net earnings: $85,000 − $12,000 = $73,000
- Taxable base: $73,000 × 0.9235 = $67,416
- Social Security portion: $67,416 × 12.4% = $8,360 (well under the $168,600 cap)
- Medicare portion: $67,416 × 2.9% = $1,955
- Additional Medicare: $0 (under the $200,000 threshold for single filers)
- Total SE tax: $10,314
- Deductible half: $5,157 (reduces your taxable income for the income-tax calculation)
So on $73,000 of net freelance profit, SE tax alone eats $10,314. On top of that, you'll still owe federal income tax on (roughly) $67,843 after the SE tax deduction. That's why freelancers are told to set aside 25%–30% of every dollar for taxes.
How to actually pay this (and when)
Self-employment tax isn't withheld from anywhere — there's no employer to deduct it from your check. The IRS wants it in four roughly equal installments across the year. The 2026 quarterly due dates are:
- Q1 estimated payment: April 15, 2026 (for income earned January–March)
- Q2 estimated payment: June 16, 2026 (for income earned April–May)
- Q3 estimated payment: September 15, 2026 (for income earned June–August)
- Q4 estimated payment: January 15, 2027 (for income earned September–December)
You send these through IRS Direct Pay or EFTPS. If you miss them and try to pay everything at tax time in April, the IRS charges an underpayment penalty on top of what you owe. The penalty isn't huge for a first-time offender but it compounds if you keep doing it.
Five ways to legally reduce your SE tax
- Track every real business expense. Every dollar of legitimate expense (mileage, software subscriptions, home office, professional services, business meals at 50%) drops your net earnings and therefore your SE tax by 15.3 cents on the dollar.
- Consider an S-corp election if your net profit is comfortably above about $40,000–$60,000. An S-corp lets you split income into "reasonable salary" (subject to FICA) and "distributions" (not subject to SE tax). The savings can be significant but you take on payroll, state filing fees, and audit risk. Don't do this just based on a blog post — run the numbers and talk to a CPA.
- Fund a SEP-IRA or Solo 401(k). Retirement contributions don't reduce your SE tax directly, but they reduce your income tax, which is the other 20%–30% of your freelance tax bill. A Solo 401(k) lets you contribute up to $23,500 as an "employee" plus up to 25% of net compensation as an "employer," up to $70,000 total in 2026.
- Use the home office deduction. If you have a dedicated workspace, either the simplified method ($5 per square foot up to 300 sq ft) or the regular method (actual expenses allocated by square footage) reduces your net profit and your SE tax.
- Deduct health insurance premiums. Self-employed health insurance is an above-the-line deduction — it doesn't reduce SE tax but it does reduce income tax, and for most freelancers it's one of the largest line items available.
Frequently asked questions
What is the self-employment tax rate in 2026?
The self-employment tax rate in 2026 is 15.3% on the first $168,600 of net self-employment earnings — 12.4% for Social Security and 2.9% for Medicare. Above $168,600, only the 2.9% Medicare portion continues. If your net earnings exceed $200,000 (single) or $250,000 (married filing jointly), an additional 0.9% Medicare surtax applies to the excess.
Do I pay self-employment tax on my gross income or my net income?
You pay it on your net self-employment earnings — gross income minus business expenses — and then that net figure is further multiplied by 92.35% before the 15.3% rate is applied. This is the 7.65% adjustment that represents the employer half of FICA a W-2 worker would never owe.
Is half of my self-employment tax deductible?
Yes. You can deduct one-half of your SE tax as an above-the-line adjustment on your Form 1040. It lowers your adjusted gross income and therefore your federal income tax, but it does not lower the SE tax itself.
When do I have to pay self-employment tax?
SE tax isn't withheld from your checks. You pay it quarterly through estimated tax payments due April 15, June 16, September 15, and January 15 of the following year. If your total tax liability is under $1,000 you can skip the quarterlies and pay everything at tax time without penalty.
Do I owe SE tax if I only made a little on the side?
You owe self-employment tax once your net self-employment earnings reach $400 or more for the year. Below that, you don't owe SE tax on it (though you may still owe regular income tax depending on your total situation).
Does this calculator include federal income tax?
No. This calculator is specifically for self-employment tax — the 15.3% Social Security and Medicare portion. Your total federal tax bill is SE tax plus federal income tax based on your bracket, minus credits and deductions. For the full picture, use our upcoming 1099 Tax Calculator or talk to a tax professional.
When you should talk to a CPA instead of trusting a calculator
A calculator is a starting point, not a substitute for professional advice. Call a CPA if any of these are true: your net self-employment income is above $100,000; you're thinking about electing S-corp status; you have income from multiple states; you have children or other dependents who change your credits picture; you're behind on quarterly payments and want to minimize penalties; or you just don't want to deal with it. A decent self-employed CPA costs $400–$1,200 a year and almost always pays for themselves through better deductions and strategy.