Start With Business Income
Begin with the income generated from your self-employed activity that must be reported for tax purposes.
U.S. TAX GUIDE
Self-Employment Tax Explained for Freelancers and Business Owners
If you work for yourself, your tax responsibilities can look different from those of a traditional employee. Learn how self-employment tax works, who generally pays it, how net earnings are calculated, and how estimated tax payments fit into the picture.
15.3%
Social Security + Medicare rate
$400+
General net-earnings threshold
Schedule SE
Used to calculate SE tax
SELF-EMPLOYMENT TAX
Social Security
12.4%
Medicare
2.9%
Combined rate
15.3%
Generally calculated on 92.35% of net earnings
THE BASICS
What Is Self-Employment Tax?
Self-employment tax is the Social Security and Medicare tax that generally applies to people who work for themselves. It is separate from federal income tax, although both can apply to the same business income.
Employees generally split Social Security and Medicare taxes with their employers. When you are self-employed, there is no traditional employer paying its share on your behalf, so the self-employment tax system accounts for both portions.
Sole proprietors, independent contractors, partners and certain other people working for themselves can be subject to self-employment tax. A single-member LLC that is disregarded for federal income tax purposes can also fall under these rules.
Self-employment tax generally applies when net earnings from self-employment reach $400 or more, subject to special rules for certain types of income.
SELF-EMPLOYED TAX PLANNING
Business income and expenses help determine the net earnings used for self-employment tax.
HOW IT STARTS
Who Generally Has to Pay Self-Employment Tax?
Self-employment tax can apply to more than just someone who owns a traditional small business. Freelancers, independent contractors, consultants, online sellers and people earning income through qualifying gig work may also have self-employment tax responsibilities.
For a sole proprietor or independent contractor, business income and expenses are generally reported on Schedule C. If total net earnings from self-employment are $400 or more, Schedule SE is generally used to calculate self-employment tax.
The important distinction is that self-employment tax is generally based on net earnings, not simply the total amount of money that came into your business.
That makes accurate income records and legitimate business expense records an important part of tax preparation for self-employed workers.
THE CALCULATION
How Self-Employment Tax Is Calculated
The calculation is more specific than simply applying 15.3% to every dollar your business receives. The IRS generally starts with net earnings from self-employment and uses a 92.35% factor when determining the amount subject to self-employment tax.
→
Subtract Eligible Expenses
Ordinary and necessary business expenses can reduce business income when they qualify under applicable tax rules.
→
Determine Net Earnings
Net earnings are the starting point for determining the amount that may be subject to self-employment tax.
→
Calculate Schedule SE
Schedule SE is used to figure the self-employment tax reported with your federal income tax return.
SOCIAL SECURITY & MEDICARE
What Makes Up the 15.3% Self-Employment Tax Rate?
The standard self-employment tax rate consists of two parts: 12.4% for Social Security and 2.9% for Medicare. The combined rate is 15.3%.
The Social Security portion has an annual wage base limit. For 2026, the Social Security wage base is $184,500. Medicare tax does not have the same wage base limit.
Higher-income taxpayers may also be subject to the Additional Medicare Tax under separate rules. The Additional Medicare Tax is not part of the basic 15.3% rate.
STANDARD SELF-EMPLOYMENT TAX
15.3%
2026 Social Security wage base
$184,500
Medicare wage base
No limit
BUSINESS INCOME
Why Business Expenses Matter
Self-employment tax is generally based on net earnings rather than gross business receipts. That means qualifying business expenses can play an important role in determining the amount of business income that remains after expenses.
The IRS generally calculates net earnings for this purpose after accounting for ordinary and necessary trade or business expenses.
Keeping good records throughout the year makes it easier to separate business income from expenses and gives you better information when preparing Schedule C and Schedule SE.
Gig workers and independent contractors should also keep receipts and records because business income generally has to be reported even when a payer does not issue a Form 1099.
KEEP GOOD RECORDS
Accurate income and expense records make tax reporting easier throughout the year.
PAYING DURING THE YEAR
How Estimated Taxes Fit Into Self-Employment
Traditional employees usually have federal income tax withheld from their paychecks. Self-employed workers generally do not have an employer withholding federal taxes from business payments, so they may need to make estimated tax payments during the year.
Estimated tax payments can cover both federal income tax and self-employment tax. The IRS generally says individuals, including sole proprietors, partners and S corporation shareholders, may need estimated tax payments if they expect to owe $1,000 or more when their return is filed.
The exact rules depend on your circumstances, prior-year tax situation, income pattern and other factors. If your income changes significantly during the year, estimated tax calculations may need to be adjusted.
See IRS estimated tax guidance →
TAX FORMS
Which Forms Are Used for Self-Employment Income?
The form you use depends on how your business is structured and how your income is reported. For many sole proprietors and independent contractors, Schedule C and Schedule SE are central to the federal tax return.
Individual Tax Return
Self-employment income and related tax information ultimately flow into your individual federal income tax return when applicable.
Business Income and Expenses
Sole proprietors generally use Schedule C to report business income and qualifying business expenses.
Self-Employment Tax
Schedule SE is used to calculate the Social Security and Medicare taxes associated with self-employment income.
Estimated Tax Payments
Form 1040-ES provides worksheets and payment information for individuals making estimated tax payments.
AN IMPORTANT DEDUCTION
Can You Deduct Part of Your Self-Employment Tax?
Generally, one-half of your self-employment tax can be deducted as an adjustment to income when calculating adjusted gross income.
This deduction does not mean that you avoid the underlying self-employment tax. Instead, it recognizes that an employee's employer normally pays a portion of Social Security and Medicare taxes.
The applicable deduction is calculated through the federal tax forms and instructions used for your return.
SELF-EMPLOYMENT TAX
50%
Generally deductible as an adjustment to income.
The actual deduction is calculated using the applicable federal tax forms and instructions.
WHO IT CAN AFFECT
Self-Employment Tax Can Apply to Different Types of Work
You do not have to run a large company to have self-employment tax responsibilities. The rules can apply to many types of independent work.
01
Freelancers
Independent writers, designers, developers, consultants and other professionals may have self-employment income.
02
Independent Contractors
Contractors who receive payments for services rather than employee wages may need to account for self-employment tax.
03
Gig Workers
Certain app-based drivers, delivery workers and other gig workers can have self-employment tax obligations.
04
Sole Proprietors
People operating businesses without a separate corporate tax structure generally report business activity on their individual return.
COMMON MISTAKES
What Self-Employed Workers Often Overlook
01
Looking only at gross revenue
Self-employment tax generally focuses on net earnings, so business expenses and accurate bookkeeping matter.
02
Forgetting estimated payments
Independent workers may not have taxes withheld from their payments and may need to make estimated tax payments.
03
Mixing personal and business expenses
Keeping clear records makes it easier to identify legitimate business expenses and prepare tax forms accurately.
04
Assuming a 1099 is required to report income
Business income generally must be reported even if a payer does not provide a Form 1099.
RELATED TAX GUIDES
Explore More Tax Resources
Build a broader understanding of U.S. taxes with these related GrowthSmartly guides.
01
Income Tax
Understand how federal income tax works and how taxable income is determined.
Explore Income Tax → 02Tax Brackets
Learn how marginal tax brackets work and how different portions of income are taxed.
Explore Tax Brackets → 03Tax Deductions
Explore how eligible deductions can reduce taxable income on your federal return.
Explore Tax Deductions → 04Tax Credits
Learn how tax credits differ from deductions and how eligible credits can reduce tax.
Explore Tax Credits → 05Tax Withholding
Understand how taxes are collected from paychecks and when withholding may need review.
Explore Tax Withholding → 06Capital Gains Tax
Learn how profits from investments and property can affect your federal tax return.
Explore Capital Gains →
LATEST INSIGHTS
Latest Money & Tax Articles
Loading latest articles...
SELF-EMPLOYMENT TAX FAQ
Clear answers to common questions about freelance and business taxes.
FREQUENTLY ASKED QUESTIONS
Self-Employment Tax Questions, Answered
Self-employment tax is generally the Social Security and Medicare tax that applies to people who work for themselves. The standard combined rate is 15.3%, subject to applicable rules and limitations.
Generally, self-employed individuals with net earnings of $400 or more may have to pay self-employment tax. Special rules apply to certain types of income and workers.
No. Self-employment tax primarily covers Social Security and Medicare taxes. Federal income tax is a separate tax that can also apply to your taxable income.
Generally, net earnings from self-employment are used as the starting point, and 92.35% of those net earnings is generally used to determine the amount subject to self-employment tax, with applicable Social Security and Medicare rules then applied.
Freelancers who are treated as self-employed generally may owe self-employment tax when their net earnings meet the applicable threshold. Gig workers and independent contractors can also fall under these rules.
You may need to make estimated tax payments during the year if you expect to owe enough federal tax when filing. Estimated payments can cover both income tax and self-employment tax.
Generally, one-half of self-employment tax can be deducted as an adjustment to income when determining adjusted gross income. The applicable amount is calculated through the federal tax forms and instructions.
Schedule SE, filed with Form 1040 or an applicable individual income tax return, is generally used to calculate self-employment tax.
PLAN AHEAD
Explore Tax Resources →
Stay ahead of your self-employment tax obligations.
Understanding your business income, expenses, estimated payments and federal tax forms can make year-round tax planning much easier.