Self-employment tax is 15.3% applied to 92.35% of your net business profit — 12.4% for Social Security on the first $184,500 of that adjusted amount (the 2026 wage base), plus 2.9% for Medicare with no cap. It is calculated on Schedule SE, it is separate from income tax, and you owe it even in a year when your income tax is zero.
Why the tax exists (and why it feels bigger than expected)
Employees pay 7.65% of every paycheck toward Social Security and Medicare, and their employer matches it with another 7.65% the employee never sees. Work for yourself and you are both sides of that arrangement: you pay both halves, 15.3% in total. The math below is exactly what the Self-Employment Tax Estimator runs — this guide walks through it so you can see where every dollar comes from.
Step 1: Start with net profit, not what you billed
Self-employment tax is never calculated on gross receipts. Start with your net profit: total business income minus deductible business expenses — the bottom line of Schedule C. A freelancer who bills $90,000 and has $30,000 of deductible expenses runs every calculation below on $60,000. This is why expense tracking is a tax strategy, not just bookkeeping: every legitimate deductible dollar removes about 14 cents of SE tax before income tax is even considered.
Step 2: Apply the 92.35% adjustment
Multiply your net profit by 92.35% (0.9235). The reason is fairness between employees and the self-employed: employees don't pay FICA on their employer's matching half, so the IRS shrinks your tax base by that same employer-equivalent 7.65% before applying the rate. The result is called net earnings from self-employment, and it is the number the 15.3% actually applies to.
One threshold to know: if that adjusted amount comes to under $400 — net profit of about $433 or less — no self-employment tax is owed at all. Above it, the tax applies in full.
Step 3: Apply the two rates
- Social Security — 12.4% on the adjusted base, but only up to the 2026 wage base of $184,500. Earnings above that pay no additional Social Security tax. Because of the 92.35% adjustment, your net profit has to reach roughly $199,800 before the cap starts helping you.
- Medicare — 2.9% on the entire adjusted base, with no cap. High earners pay an additional 0.9% Medicare tax on adjusted earnings above $200,000 if single, or $250,000 if married filing jointly.
Add the two pieces and you have your self-employment tax. Note what is not in this calculation: your filing status barely matters here, and deductions like the standard deduction do not reduce SE tax at all. They come in at the next step.
Worked example — $60,000 of net profit
Priya is a single freelance designer with $60,000 of net self-employment income for 2026:
- Adjusted base: $60,000 × 92.35% = $55,410.00
- Social Security: $55,410.00 × 12.4% = $6,870.84 (all of it is under the wage base)
- Medicare: $55,410.00 × 2.9% = $1,606.89
- Self-employment tax: $8,477.73
And because half of SE tax is deductible against income tax, her federal income tax is smaller than an employee's would be on the same profit:
- Adjusted gross income: $60,000 − $4,238.87 (half of SE tax) = $55,761.13
- Taxable income: $55,761.13 − $16,100 (2026 single standard deduction) = $39,661.14
- Federal income tax: 10% × $12,400 ($1,240.00) + 12% × $27,261.14 ($3,271.34) = $4,511.34
- Combined federal bill: $12,989.07 — an effective rate of about 21.6% of net profit, or roughly $3,247.27 per quarter.
Two lessons hide in those numbers. First, SE tax is two-thirds of the total bill — it's the main event, not a surcharge. Second, the popular "set aside 25–30%" rule of thumb exists because the real combined rate lands right in that band for many freelancers. Run your own income through the SE Tax Estimator to get your personal percentage, then split the annual figure into dated payments with the Quarterly Estimated Tax Calculator.
What changes at higher incomes
The Social Security cap is the one piece of good news in the system. Take a consultant with $250,000 of net profit: the adjusted base is $230,875, but Social Security stops at the wage base — $184,500 × 12.4% = $22,878.00, no more. Medicare keeps going: $230,875 × 2.9% = $6,695.38, plus the additional 0.9% on the $30,875 above the single-filer threshold, another $277.88. Total SE tax: about $29,851. Her marginal SE rate on the next dollar earned is just 3.8% (Medicare plus the surcharge), not 15.3% — which is why high-earning freelancers think about SE tax very differently from everyone else.
Two legal ways the bill gets smaller
First, the half-of-SE-tax deduction above — automatic, no election needed. Second, retirement contributions: money you contribute to a retirement plan reduces your income tax (though not your SE tax, since contributions don't reduce net profit). How much room you have as both employee and employer of your own business is exactly what the Solo 401(k) Calculator works out. What doesn't help: the standard deduction, most credits, and the qualified business income deduction all act on income tax only. Anyone who tells you a deduction "saves self-employment tax" should be asked which line of Schedule SE it touches.
Estimates only — not tax advice. This guide explains the standard calculation using 2026 IRS figures (92.35% adjustment, 15.3% combined rate, $184,500 Social Security wage base, 2026 brackets and standard deduction). It excludes the qualified business income deduction, credits, S-corporation arrangements, and state taxes, any of which can change your real liability. Confirm your situation at irs.gov or with a tax professional before filing or paying.