Self-employment tax is how freelancers pay Social Security and Medicare. The rate is 15.3%: 12.4% for Social Security plus 2.9% for Medicare, per the IRS. But it isn’t charged on your full profit. It’s charged on 92.35% of it, the Social Security part stops at a yearly cap, and you get to deduct half of it on your income tax return. Put those together and most freelancers pay an effective rate of about 14.13% of net profit, not 15.3%.
Who pays it
You owe self-employment tax if your net earnings from self-employment are $400 or more, according to the IRS. Church employee income has its own, lower threshold. Sole proprietors, independent contractors and single-member LLC owners taxed as sole proprietors all fall under it. It’s reported on Schedule SE and added to your income tax on Form 1040.
It’s separate from income tax, and that matters. Deductions like the standard deduction don’t reduce it. So a freelancer can owe zero income tax and still owe self-employment tax.
How it’s calculated, in four steps
The 2026 version of the calculation is the Self-Employment Tax and Deduction Worksheet in the 2026 Form 1040-ES. The same worksheet appears as Worksheet 2-3 in Publication 505 (2026).
1. Start from 92.35% of your net profit
Take your net profit (Schedule C, line 31, for a sole proprietor) and multiply it by 92.35%. The result is your net earnings from self-employment, the base the tax is charged on. If it’s under $400, Publication 505 says you won’t owe self-employment tax.
Why 92.35%? Mathematically, 92.35% is 100% minus 7.65%, and 7.65% is exactly half of 15.3%. In effect, you’re not taxed on the slice of profit that corresponds to the “employer half” of the tax. An employee’s FICA isn’t charged on what their employer pays, either.
2. Apply 12.4% for Social Security, up to the wage base
Multiply your net earnings by 12.4%, but only up to the Social Security maximum. For 2026 that’s $184,500, per Form 1040-ES. The cap covers wages and self-employment earnings combined. If you also had W-2 wages subject to Social Security tax, the worksheet subtracts them from $184,500 first, and only the remaining room is available for your self-employment earnings.
3. Apply 2.9% for Medicare, with no cap
Multiply all of your net earnings by 2.9%. Unlike Social Security, there’s no upper limit.
4. Deduct half on your income tax return
Add steps 2 and 3 to get your self-employment tax. Then take 50% of it as a deduction on Schedule 1 (Form 1040), line 15, per the Form 1040-ES worksheet. This lowers your adjusted gross income and so your income tax. It doesn’t lower the self-employment tax itself. In the IRS’s words, this deduction “only affects your income tax.”
Example: $60,000 of net profit
- 1$60,000
Net profit (Schedule C)
- 2$55,410
Net earnings from self-employment
$60,000 × 92.35%
- 3$6,871
Social Security portion
$55,410 × 12.4% (under the $184,500 cap)
- 4$1,607
Medicare portion
$55,410 × 2.9%
- 5$8,478
Self-employment tax
$6,871 + $1,607
- 614.13%
Effective rate on net profit
$8,478 ÷ $60,000
- 7$4,239
Deduction on Schedule 1, line 15
$8,478 × 50%
Assumes no W-2 wages. Rounded to the dollar, as on the IRS worksheet.
The 14.13% isn’t a coincidence. It’s 15.3% × 92.35%, and it holds at any profit level below the Social Security cap. The $4,239 deduction then reduces your AGI. How much income tax that saves depends on your bracket.
Example: a high earner past the Social Security cap
Now take $220,000 of net profit. Net earnings are $220,000 × 92.35% = $203,170, which is above the $184,500 cap:
- Social Security: $184,500 × 12.4% = $22,878 (the maximum for 2026)
- Medicare: $203,170 × 2.9% = $5,892
- Self-employment tax: $28,770, or about 13.1% of net profit
- Deductible half: $14,385
A single filer at this level also crosses the threshold for the separate 0.9% Additional Medicare Tax. The threshold is $200,000 for single filers, $250,000 married filing jointly and $125,000 married filing separately, per Publication 505 (2026). Here that’s ($203,170 − $200,000) × 0.9% ≈ $29, figured on Form 8959 and not part of the self-employment tax.
The chart shows the pattern. Self-employment tax grows in a straight line until net earnings reach the $184,500 wage base, at roughly $199,783 of net profit. After that, only the 2.9% Medicare part keeps growing, so the effective rate falls.
- $25,000 profit$3,533(14.13%)
- $50,000 profit$7,065(14.13%)
- $100,000 profit$14,129(14.13%)
- $150,000 profit$21,194(14.13%)
- $200,000 profit$28,234(14.12%)
- $250,000 profit$29,573(11.83%)
- $300,000 profit$30,912(10.30%)
Assumes no W-2 wages and a single filer. Social Security (12.4%) stops at $184,500 of net earnings — reached at about $199,783 of net profit — while Medicare (2.9%) has no cap. Excludes the separate 0.9% Additional Medicare Tax. Figures rounded to the dollar.
Where this fits in your overall tax bill
Self-employment tax is only half the picture. Income tax comes on top of it, and it’s the reason freelancers need to make quarterly estimated payments. See Quarterly Estimated Taxes for the Self-Employed for how the two combine into your quarterly payment, and How Much Should a Freelancer Set Aside for Taxes? for the total at different income levels.
The same numbers matter for retirement savings. Solo 401(k) and SEP IRA contribution limits for the self-employed are based on net profit minus the deductible half of self-employment tax. Our Self-Employed Retirement Contribution Calculator runs that calculation for you.
Does forming an LLC or S corp change it?
An LLC alone doesn’t: a single-member LLC is taxed like a sole proprietorship by default, so the same self-employment tax applies. See LLC vs. Sole Proprietorship. An S corporation election does change it. You pay payroll taxes on a reasonable salary instead of self-employment tax on all profit. Whether that saves money is worked through in S Corp Election for Freelancers.
Bottom line
Self-employment tax is 15.3% on paper. In practice you pay 12.4% + 2.9% on 92.35% of your net profit, or about 14.13% of profit below the cap. The 12.4% stops at $184,500 of combined earnings in 2026, and half of what you pay comes back as an income tax deduction. The formula is short enough to run yourself. Getting the base right (92.35%, less any W-2 wages already counted toward the cap) is where most mistakes happen.