Self-employment tax is the tax most new freelancers don't see coming. A consultant earning $100,000 in their first year as an LLC owner has already paid federal and state income tax mentally before they remember that an additional 15.3 percent is owed for Social Security and Medicare on the same earnings. That's roughly $14,000 of self-employment tax on top of everything else, for someone who previously had those same taxes split with an employer and barely noticed. The mechanics aren't complicated, but the cash flow impact is significant, and the quarterly estimated payment schedule catches many first-year self-employed filers off guard.
How Self-Employment Tax Is Structured Self-employment tax covers the same programs that FICA covers for traditional employees: Social Security (old age, survivors, disability insurance) and Medicare. The difference is that self-employed people pay both the employee share and the employer share because they're both. The combined rate is 15.3 percent on net earnings, broken down as 12.4 percent for Social Security and 2.9 percent for Medicare.
For 2026, the Social Security portion applies only to the first $184,500 of net earnings (the wage base, up from $176,100 in 2025). Earnings above that aren't subject to the 12.4 percent Social Security portion, but the 2.9 percent Medicare portion continues on all net earnings. An additional 0.9 percent Medicare surtax applies to earnings above $200,000 for single filers and $250,000 for married filing jointly.
Who Has to Pay Self-Employment Tax? Anyone with net self-employment earnings of $400 or more in a calendar year owes self-employment tax. This includes sole proprietors filing Schedule C, partners in partnerships reporting earnings on Schedule K-1, members of LLCs treated as partnerships, and church employees earning $108.28 or more. S-corp shareholder distributions are not self-employment earnings; S-corp wages are subject to normal FICA instead.
How to Calculate Self-Employment Tax The calculation starts with net earnings from self-employment, which is gross income minus business expenses. Before applying the 15.3 percent rate, the IRS lets self-employed filers multiply net earnings by 92.35 percent (to approximate what an employee's share of FICA would leave them with). That adjusted number is the self-employment earnings base.
For example, $80,000 of net earnings × 92.35 percent = $73,880 in SE tax base. Apply 15.3 percent, and the self-employment tax is $11,304. One-half of the self-employment tax ($5,652 in this example) is deductible above-the-line on the federal return, which reduces adjusted gross income but not self-employment tax itself.
When Is Self-Employment Tax Actually Due? Self-employment tax is paid through quarterly estimated payments using Form 1040-ES . Payments are due April 15, June 15, September 15, and January 15 of the following year. Failing to make quarterly payments can trigger underpayment penalties even when the full tax is paid with the return, so first-year self-employed filers should set up quarterly payments from the start.
How Self-Employment Tax Differs From Payroll Tax The headline rate is the same: 15.3 percent combined. But for employees, that rate is split 7.65 percent employer and 7.65 percent employee, and only the 7.65 percent employee share shows up on the paycheck. For self-employed filers, the full 15.3 percent lands on the tax return. This is why switching from W-2 to 1099 often requires a 15 to 20 percent gross-pay bump to stay whole after taxes. HR teams fielding questions from contractors moving to employment (or vice versa) should be ready to explain this math.
The 2026 Social Security wage base increase has direct impact here. Every self-employed filer earning above $176,100 will owe more Social Security tax in 2026 than they did in 2025, even if their gross earnings didn't change.
Managing Self-Employment Tax as a Solo Business Owner Self-employment tax is the single biggest tax line for many self-employed filers. Build quarterly estimated payments into the cash flow plan from day one, track deductible business expenses carefully to reduce the net earnings base, and consider whether S-corp election (with reasonable wages and distributions) reduces overall self-employment tax on higher earnings. The IRS Schedule SE page covers the calculation in detail. The Social Security Administration publishes the annual wage base each fall. For the related deduction that self-employed filers can use for health insurance, see self-employed health insurance deduction . For general pay tax concepts, see FICA .
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