The short answer
Self-employment tax is the Social Security and Medicare tax for people who work for themselves. When you are an employee, these taxes are withheld from your pay and your employer pays a matching share. When you are self-employed, you generally pay both shares yourself — figured on Schedule SE and owed in addition to federal income tax.
Who owes it
You generally must pay self-employment tax if your net earnings from self-employment are $400 or more. That includes freelancers, independent contractors, and sole proprietors. If you are not sure whether your work is self-employment, see W-2 vs 1099.
How it is calculated
| Piece | General rule |
|---|---|
| Social Security | 12.4% |
| Medicare | 2.9% |
| Total self-employment tax rate | 15.3% |
| Amount the rate is generally applied to | 92.35% of net earnings from self-employment |
| Social Security limit | Applies only up to the annual wage base: $176,100 for 2025, $184,500 for 2026 |
At higher income levels, an Additional Medicare Tax can also apply — see below.
Social Security wage base and Additional Medicare Tax
| 2025 | 2026 | |
|---|---|---|
| Maximum combined wages and self-employment earnings subject to the 12.4% Social Security part | $176,100 | $184,500 |
| Medicare part (2.9%) | No limit | No limit |
The 2025 amount is from the Schedule SE instructions; the 2026 amount is from Publication 334 and Publication 15 (2026).
Additional Medicare Tax: a 0.9% Additional Medicare Tax may apply if your self-employment income (Schedule SE, line 6) is more than $200,000 (single, head of household, or qualifying surviving spouse), $250,000 (married filing jointly), or $125,000 (married filing separately). If you also have wages, the threshold for your self-employment income is reduced (but not below zero) by your wages subject to Additional Medicare Tax. It is figured on Form 8959.
If you also have a W-2 job
Social Security wages from a job count toward the same wage base. On Schedule SE, your Social Security wages and tips (boxes 3 and 7 of Form W-2) are subtracted from the maximum, so the 12.4% Social Security part applies only to the self-employment earnings that fit under what is left. The 2.9% Medicare part still applies to all of your net earnings from self-employment.
Example (illustrative, 2025): Raj has $150,000 of Social Security wages from his job and $60,000 of Schedule C profit. His net earnings from self-employment are $55,410 ($60,000 × 92.35%). Only $26,100 ($176,100 − $150,000) is left under the wage base, so the Social Security part is about $3,236 ($26,100 × 12.4%) and the Medicare part is about $1,607 ($55,410 × 2.9%) — about $4,843 in total, instead of about $8,478 without the W-2 wages. Because his wages plus self-employment earnings are more than $200,000, he may also owe some Additional Medicare Tax on Form 8959.
Example (illustrative)
Mia is a freelance designer with no W-2 job. Her 2025 Schedule C shows $40,000 of net profit after business expenses — well below the Social Security wage base. Generally:
| Step | Amount |
|---|---|
| Net profit from Schedule C | $40,000 |
| × 92.35% | $36,940 |
| × 15.3% self-employment tax | about $5,652 |
That is in addition to any income tax on her profit. She can also deduct the employer-equivalent portion of the self-employment tax in figuring her adjusted gross income, which lowers her income tax.
What lowers it — and what does not
- Business expenses reduce your Schedule C profit, so they reduce your net earnings from self-employment. They do not change the 15.3% rate. See What can I deduct as a small business owner?
- The deduction for part of the tax — the employer-equivalent portion — reduces your adjusted gross income for income tax purposes. It does not reduce the self-employment tax itself.
No one withholds self-employment tax from 1099 income. Estimated tax payments during the year can keep you from owing a large amount — and possibly an underpayment penalty — at filing time. See Quarterly estimated taxes.