Self-employment (SE) tax is 15.3% — applied to 92.35% of your net self-employment earnings — covering both the employee share (7.65%) and the employer share (7.65%) of Social Security and Medicare (SSA COLA Fact Sheet 2026; IRC §1402). You may deduct half of SE tax from gross income before computing federal income tax. For 2026, Social Security tax within SE applies only to net earnings up to the $184,500 wage base; Medicare applies to all earnings, with an additional 0.9% if your net earnings and other income exceed the threshold for your filing status.
Use the self-employment tax calculator to estimate your SE tax and federal income tax together.
How the SE Tax Calculation Works
Step 1 — Net earnings: Multiply net profit (Schedule C line 31) by 0.9235. This is the base for SE tax. If net earnings are below $400, no SE tax is owed.
Step 2 — Social Security tax: 12.4% on net earnings up to $184,500.
Step 3 — Medicare tax: 2.9% on all net earnings. Additional Medicare Tax (0.9%) applies if net earnings plus any W-2 wages exceed $200,000 (single) or $250,000 (joint).
Step 4 — Total SE tax: SS + Medicare. Report on Schedule SE.
Step 5 — Half deduction: Deduct 50% of SE tax from gross income on Schedule 1, Line 15, reducing AGI before income tax is calculated.
Worked Example: $80,000 Net Profit (Single Filer)
| Step | Calculation | Amount |
|---|---|---|
| Net profit | — | $80,000 |
| Net earnings (×0.9235) | $80,000 × 0.9235 | $73,880 |
| Social Security (12.4%) | $73,880 × 12.4% | $9,161 |
| Medicare (2.9%) | $73,880 × 2.9% | $2,143 |
| Total SE tax | — | $11,304 |
| Half deduction | $11,304 ÷ 2 | $5,652 |
| AGI | $80,000 − $5,652 | $74,348 |
| Standard deduction | — | $16,100 |
| Federal taxable income | $74,348 − $16,100 | $58,248 |
| Federal income tax | — | $7,527 |
| Total taxes (SE + income) | $11,304 + $7,527 | $18,831 |
| Effective rate on profit | $18,831 ÷ $80,000 | 23.5% |
| Estimated quarterly payment | ($11,304 + $7,527) ÷ 4 | $4,708 |
The key insight: the half-deduction reduces AGI, which in turn reduces income tax. Without it, taxable income would be $63,900 and federal tax would be $8,898 — $1,371 more.
SE Tax at Different Profit Levels
| Net Profit | Net Earnings (×0.9235) | SE Tax (15.3%) | Half Deduction | Effective SE Rate |
|---|---|---|---|---|
| $20,000 | $18,470 | $2,826 | $1,413 | 14.1% |
| $40,000 | $36,940 | $5,652 | $2,826 | 14.1% |
| $60,000 | $55,410 | $8,478 | $4,239 | 14.1% |
| $80,000 | $73,880 | $11,304 | $5,652 | 14.1% |
| $100,000 | $92,350 | $14,130 | $7,065 | 14.1% |
| $200,000 | $184,700 → $184,500 SS cap | — | — | SS capped; Medicare uncapped |
The “effective SE rate” in the first four rows is approximately 14.1% of net profit because the half-deduction reduces the after-tax cost. At $200,000+ profit, the SS portion is capped but Medicare continues.
What Happens When You Have Both W-2 Wages and SE Income
If you have a W-2 job in addition to self-employment, your W-2 wages count toward the $184,500 Social Security wage base first. Only the remaining room is subject to SS tax on SE earnings.
Example: $150,000 W-2 wages + $50,000 SE profit:
- SS wage base room remaining: $184,500 − $150,000 = $34,500
- SE net earnings: $50,000 × 0.9235 = $46,175
- SS tax on SE: $34,500 × 12.4% = $4,278
- Medicare on SE: $46,175 × 2.9% = $1,339
- Total SE tax: $5,617
The Additional Medicare Tax may also apply if combined earnings exceed the threshold.
Quarterly Estimated Taxes
Self-employed workers who expect to owe at least $1,000 in federal tax must make quarterly estimated payments. The quarterly amount is approximately (SE tax + federal income tax attributable to SE income) ÷ 4. In the $80,000 example above, that is $18,831 ÷ 4 = $4,708 per quarter. See quarterly estimated taxes for due dates and safe-harbor rules.
Comparing SE Tax to Employee FICA
| W-2 Employee ($80k) | Self-Employed ($80k profit) | |
|---|---|---|
| Visible FICA | $6,120 (7.65%) | — |
| SE tax | — | $11,304 (≈14.1% of profit) |
| Employer FICA cost | $6,120 (not from your pay) | Paid as SE tax |
| Half deduction | None | $5,652 reduces AGI |
From a total economic standpoint, the combined employee+employer FICA at $80k is $12,240. The SE worker pays $11,304 (slightly less because the 92.35% factor partially accounts for the deductibility structure). For a direct take-home comparison, see 1099 vs. W-2 take-home pay.