Self-employment tax, explained (2026)

Self-employment tax is 12.4% for Social Security plus 2.9% for Medicare — 15.3% total. It applies to 92.35% of your net profit, not the full amount, because you're allowed to exclude the employer-equivalent half from the base.

So on $80,000 of net profit: $80,000 × 92.35% = $73,880 of net earnings, and 15.3% of that is about $11,304.

The 12.4% Social Security portion only applies up to an annual earnings cap; above it, only the 2.9% Medicare portion continues. High earners also pay an extra 0.9% Additional Medicare Tax above $200,000 (single). This is why the effective rate on very high profit is lower than 15.3%.

One half of your self-employment tax is deductible against your income tax. It doesn't reduce the self-employment tax itself, but it lowers your taxable income — worth roughly your marginal rate times half the tax.

Because the tax is on net profit, every deductible business expense you actually incur reduces both self-employment tax and income tax. Home office, mileage, software, equipment, professional fees and health insurance premiums are the ones most often missed.

Who has to pay self-employment tax?

Anyone with $400 or more of net self-employment earnings in the year, including part-time freelancers and side-gig workers.

Does an S-corp avoid self-employment tax?

It can reduce it: you pay payroll tax on a reasonable salary and take the rest as distributions. It adds payroll and filing costs, so it usually only pays off at higher profit levels. Talk to a CPA.

Is self-employment tax the same as income tax?

No. They are separate and you owe both. Self-employment tax is a flat-ish 15.3% on net earnings; income tax runs through the progressive brackets.