Self-Employment Tax Guide: Rates, Deductions & Quarterly Taxes

What Is Self-Employment Tax?

Self-employment tax (SE tax) is the Social Security and Medicare tax paid directly to the IRS by self-employed individuals. It is the self-employed equivalent of FICA — the Federal Insurance Contributions Act payroll tax deducted from every W-2 paycheck.

When you work as an employee, your employer pays half of your FICA taxes and withholds the other half from your paycheck. You never see the employer half. When you are self-employed — as a freelancer, consultant, sole proprietor, or independent contractor — you are both the employer and the employee. You pay both halves yourself.

According to the IRS, approximately 27 million Americans file Schedule C each year, reporting self-employment income. The Bureau of Labor Statistics (2025) estimates 16.4 million peopleare self-employed in the US — about 10% of the entire workforce. The Small Business Administration (SBA) reports that self-employed workers and sole proprietors represent the largest single segment of US business owners. Every one of them owes SE tax on qualifying net earnings.

For a complete explanation of how FICA taxes work on both sides of employment, see our FICA tax guide.

The SE Tax Rate: 15.3% Broken Down

The self-employment tax rate is 15.3% for 2026, split into two components:

• Social Security: 12.4% — applies to net earnings up to the Social Security wage base of $176,100 in 2026 (per IRS Publication 334). Earnings above that cap owe no Social Security portion.
• Medicare: 2.9% — applies to all net earnings with no cap.

There is also an Additional Medicare Tax of 0.9%that applies to net self-employment income above $200,000 for single filers, or $250,000 for married couples filing jointly. This surtax has no employer match — the full 0.9% falls on you. It is calculated on Form 8959 and added to your income tax, not your SE tax line.

The 92.35% Factor: Why SE Tax Doesn't Apply to 100% of Profit

SE tax is not calculated on your full net profit. The IRS calculates it on 92.35% of net profit. Here is why.

When an employer pays payroll taxes on a W-2 employee, the FICA base is the employee's gross wages — the employer's share is a cost on top. For self-employed people, the IRS allows an equivalent adjustment: you reduce net earnings by 7.65% (the employer-equivalent portion) before applying the 15.3% rate. That is why the multiplier is 0.9235 (1 − 0.0765).

In practice: if your Schedule C shows $75,000 net profit, your SE tax base is $75,000 × 0.9235 = $69,263. Your SE tax is $69,263 × 0.153 = $10,597.

SE Tax vs. W-2 Employment: Side-by-Side Comparison

The same gross income looks very different depending on how you earn it. Here is a direct comparison at $75,000.

The self-employed person pays more in visible taxes, but the 50% SE deduction partially offsets the income tax burden. W-2 employees also receive an employer-paid FICA contribution they never see — it is effectively part of their total compensation that flows directly to the government. To model your own situation, use our take-home pay vs. gross pay guide.

SE Tax at Common Income Levels

Here is what SE tax looks like at common net profit levels (all below the $176,100 Social Security wage base cap).

The 50% SE Tax Deduction

One of the few perks of being self-employed: the IRS lets you deduct 50% of your SE tax from your adjusted gross income. This is an above-the-line deduction reported on Schedule 1 (Form 1040), Line 15. You get it whether or not you itemize.

The logic mirrors W-2 employment. Employers deduct their half of FICA as a business expense. Self-employed workers get equivalent treatment on their “employer half.” The deduction does not reduce your SE tax — it reduces your taxable income, which lowers your federal income tax.

Example: you paid $10,597 in SE tax on $75,000 net profit. The 50% deduction is $5,299. In the 22% bracket, that saves roughly $5,299 × 0.22 = $1,166 in income taxes.

Quarterly Estimated Tax Payments

No employer withholds taxes for you. The IRS expects you to pay as you earn, using quarterly estimated tax payments that cover both SE tax and income tax in a single payment.

The four deadlines for 2026 estimated taxes are:

• April 15, 2026 — Q1 (January 1 – March 31)
• June 16, 2026 — Q2 (April 1 – May 31)
• September 15, 2026 — Q3 (June 1 – August 31)
• January 15, 2027 — Q4 (September 1 – December 31)

If you skip or underpay, the IRS charges an underpayment penalty. To avoid it, your estimated payments must cover at least 90% of your current-year tax or 100% of last year's tax (110% if your prior-year AGI exceeded $150,000). This is the safe harbor rule.

You can pay via IRS Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or by mailing Form 1040-ES. For the full breakdown of how to calculate and submit quarterly payments, see our quarterly estimated tax payments guide.

6 Tax Deductions Every Self-Employed Person Should Know

Beyond the 50% SE tax deduction, self-employed workers can dramatically reduce taxable income with these six write-offs. Each lowers your federal income tax — some also lower your SE tax base.

1. Home Office Deduction— If you use part of your home exclusively and regularly for business, you can deduct either the actual expenses (mortgage interest, utilities, insurance) allocated to that space, or use the simplified method: $5 per square foot up to 300 sq ft ($1,500 maximum). This is one of the most underutilized deductions for freelancers.
2. Self-Employed Health Insurance Premiums— You can deduct 100% of health, dental, and long-term care insurance premiums paid for yourself, your spouse, and dependents. This is an above-the-line deduction directly from Schedule 1. It does not reduce SE tax but does reduce income tax. You cannot claim it if you were eligible to participate in an employer's plan through a spouse.
3. Retirement Contributions (SEP-IRA or Solo 401k)— Self-employed workers can contribute up to 25% of net self-employment income to a SEP-IRA, up to $69,000 in 2024. A Solo 401k allows up to $23,000 in employee contributions plus 25% employer contributions. These contributions are deducted from income, reducing both income tax and future SE tax calculations.
4. Business Vehicle and Mileage— If you use a car for business, you can deduct actual vehicle expenses or the standard mileage rate. The IRS standard mileage rate is 67 cents per mile for 2024. Keep a mileage log. If you drive 10,000 business miles per year, that is a $6,700 deduction.
5. Professional Development and Education— Courses, certifications, books, conferences, and subscriptions directly related to your current business are deductible. A freelance developer's Udemy subscription? Deductible. A marketing consultant's industry conference? Deductible. Training for a completely new career does not qualify.
6. Business Software, Tools, and Subscriptions— Project management tools, accounting software, design apps, and other business-use software are fully deductible. Many self-employed workers pay hundreds per month in SaaS tools that are 100% deductible if used for business.

For guidance on setting rates that account for these deductions and your effective tax burden, see our freelance rate guide.

Who Owes Self-Employment Tax?

You owe SE tax if any of the following apply:

• Net self-employment earnings are $400 or more in a tax year
• You are a sole proprietor filing Schedule C
• You work as an independent contractor receiving 1099-NEC forms
• You are a general partner in a partnership
• You receive income from gig economy platforms (Uber, Fiverr, Upwork, etc.)

Below $400 in net self-employment earnings, no SE tax is due. But if you earn $401 from a side project alongside W-2 employment, you still owe SE tax on that $401.

S-Corp Election: Reducing SE Tax at Higher Incomes

One advanced strategy to reduce SE tax is electing S-corporation status. With an S-corp, you pay yourself a “reasonable salary” subject to payroll taxes, and take additional profit as distributions that are not subject to SE tax. The savings can be meaningful at higher income levels, but come with added complexity: payroll filings, state fees, and the need for a defensible market-rate salary.

The breakeven point (where S-corp savings exceed administrative costs) is generally considered to be around $40,000–$50,000 of net profit annually, though this varies by state. Discuss this with a CPA before making the election.

Frequently Asked Questions

How much is self-employment tax?

Self-employment tax is 15.3% of net self-employment earnings — 12.4% for Social Security (on earnings up to $176,100 in 2026) and 2.9% for Medicare with no cap. Because SE tax applies to 92.35% of net profit, the effective rate on gross profit is about 14.13%. An additional 0.9% Medicare surtax applies above $200,000 for single filers.

What is the 92.35% rule for self-employment tax?

The IRS calculates SE tax on 92.35% of net self-employment profit, not 100%. This adjustment mirrors how W-2 payroll works: employers deduct their FICA share before calculating the employee base. The 7.65% reduction (1 minus 92.35%) represents the employer-equivalent portion, giving self-employed workers a comparable treatment.

Can I deduct self-employment tax on my income taxes?

Yes. You can deduct 50% of your SE tax as an above-the-line deduction on Schedule 1 (Form 1040). This reduces your adjusted gross income and lowers your income tax — not your SE tax itself. On $100,000 net profit, the SE tax is about $14,130 and the deduction is $7,065, saving roughly $1,555 in income taxes for a 22% bracket filer.

When are quarterly estimated tax payments due in 2026?

The 2026 quarterly estimated tax deadlines are: April 15 (Q1), June 16 (Q2), September 15 (Q3), and January 15, 2027 (Q4). Missing these deadlines can trigger an IRS underpayment penalty. The safe harbor rule lets you avoid penalties by paying at least 100% of last year's tax liability (110% if prior-year AGI exceeded $150,000).

Do I owe self-employment tax if I made less than $400?

No. The IRS only requires filing Schedule SE if your net self-employment earnings are $400 or more. Below that threshold, no SE tax is due. However, even sub-$400 self-employment income may still be subject to income tax depending on your overall income situation, so you may still need to report it on Form 1040.

What are the best tax deductions for self-employed people?

The top deductions for self-employed workers include: the home office deduction, health insurance premiums, self-employed retirement contributions (SEP-IRA or Solo 401k), the 50% SE tax deduction, business vehicle mileage (67 cents per mile in 2024), and professional development or education expenses. Each reduces taxable income and lowers your income tax bill.