Updated June 17, 2026
See both taxes at once.
SE tax and income tax, side by side, from your actual numbers.
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Self-employment tax is a 15.3% federal tax on net self-employment income: 12.4% for Social Security and 2.9% for Medicare. When you work as an employee, your employer covers half of those taxes. When you work for yourself, you cover all of it. The IRS does allow a deduction for the employer-equivalent half, which softens the income tax hit, but the SE tax itself does not shrink.
What Is Self-Employment Tax?
Employees see half of Social Security and Medicare taxes taken from their paycheck. The employer quietly pays the other half. When you are self-employed, you fill both seats, so you pay the full 15.3%. Per the IRS self-employment tax guidance, this obligation kicks in at $400 of net earnings in a tax year. That is a low threshold. Most freelancers cross it fast.
SE tax is calculated on Schedule SE and filed alongside your Form 1040. It is not part of income tax. You owe both, separately, which is the detail that tends to surprise people in their first year of self-employment.
How the 15.3% Rate Breaks Down
| Component | Rate | Notes |
|---|---|---|
| Social Security | 12.4% | Applies up to the $184,500 wage base for 2026 (SSA 2026 COLA fact sheet, Oct 24, 2025) |
| Medicare | 2.9% | No income cap |
| Additional Medicare | 0.9% | Applies above $200,000 single / $250,000 married filing jointly |
| Total standard rate | 15.3% | On net self-employment income |
The Social Security component has an annual wage base that the IRS adjusts upward most years. Cross that threshold and the 12.4% portion stops for the year. Medicare has no cap at all: 2.9% runs from the first dollar to the last. Single filers earning above $200,000 also face an additional 0.9% Medicare surtax, bringing their Medicare rate to 3.8% on the excess amount.
The Half-SE-Tax Deduction: Details
The IRS treats self-employed workers as both employee and employer. On the employer side, that means paying the full 15.3%. On the plus side, it also means you get to deduct the "employer-equivalent" half of SE tax from adjusted gross income. That deduction does not cut the SE tax bill itself, but it lowers the income on which income tax is calculated. You claim it on Schedule 1. It is automatic: no separate election required.
What Counts as Self-Employment Income?
- Freelance fees and project income reported on 1099-NEC forms
- Business profit from sole proprietorships (Schedule C)
- Gig economy earnings (rideshare, delivery, online platforms)
- Net rental income if you provide substantial services
- Certain partnership income
Net income is what counts. Subtract legitimate business expenses from gross revenue and SE tax is calculated on that reduced figure, not the payment that hit your bank account. This is why tracking expenses throughout the year is worth the effort and why a single overlooked receipt is a missed deduction.
Legal Ways to Lower Self-Employment Tax
1. Maximize Business Deductions
Every deductible expense chips away at net self-employment income, and that lower net figure flows directly into a smaller SE tax base. Home office costs, business mileage, professional subscriptions, software, and health insurance premiums are common examples. The IRS asks for the business purpose, not just the receipt, so note both at the time of purchase rather than reconstructing reasons six months later.
2. Contribute to a Retirement Account
Self-employed individuals can open a SEP-IRA, Solo 401(k), or SIMPLE IRA. These contributions reduce adjusted gross income and therefore income tax, though they do not reduce SE tax itself (SE tax is calculated first, then deductions apply). A Solo 401(k) allows contributions in both the "employee" and "employer" capacity, and the combined annual limit is generous enough to shelter a large share of income for full-time freelancers.
3. Deduct Self-Employed Health Insurance Premiums
If you pay for your own health, dental, or vision insurance and are not eligible for employer-sponsored coverage through a spouse's plan, you may deduct 100% of those premiums from adjusted gross income. That is the full premium, not a partial credit. The deduction applies above the line, meaning it reduces your taxable income regardless of whether you itemize.
4. Elect S-Corp Status (for Higher Earners)
Once self-employment income holds consistently above roughly $40,000 to $50,000 per year, many tax professionals suggest electing S-corp status. As an S-corp owner-employee, you pay yourself a reasonable salary subject to payroll taxes and take the remaining profit as distributions that are not subject to SE tax. The savings are real. So are the compliance costs: payroll runs, separate filings, and annual state fees. Run the numbers with a qualified tax professional before committing.
5. Track Every Deductible Expense Meticulously
Missed deductions are usually not a knowledge problem. They are a tracking problem. A dedicated business bank account and credit card, combined with basic accounting software, catches every deductible cost as it happens rather than requiring a memory exercise in March. The setup takes an afternoon. The time it saves at filing is considerably longer.
Running the Numbers
The free 1099 tax calculator on this site shows both SE tax and federal income tax side by side. Enter net income and filing status. The result takes about five seconds and is a sharper estimate than most spreadsheet hacks you will find elsewhere.
The Social Security Administration uses your earnings record to calculate future retirement and disability benefits. SE tax payments are what build that record. You are not just writing a check to the federal government. You are crediting your own account.
When to Call a Tax Professional
Self-employed individuals owe quarterly estimated payments that cover both SE tax and income tax. The IRS estimated taxes page provides worksheets and due dates. Underpayment penalties accumulate quarter by quarter, so waiting until April to settle the full year's bill is not a free pass.
The strategies above are general reference information, not personalized tax advice. Income level, filing status, state, and business structure all change the calculation. A licensed CPA or enrolled agent who works regularly with self-employed clients will know which deductions apply to your circumstances and can spot the ones you are likely to miss. Before any significant decision about business structure or retirement contributions, that conversation is worth having.
Self-employment tax is one of the bigger surprises for people making the move from employee to freelancer. The 15.3% rate is fixed. The base it applies to is not, and that is where the work happens.
See both taxes at once.
SE tax and income tax, side by side, from your actual numbers.
Run your numbers