Self-employment tax: what it is, and how the 15.3% rate works

What self-employment tax is

An employee pays half of Social Security and Medicare tax and the employer pays the other half (IRS Topic 751). When you work for yourself, you are both, so you pay both halves. The IRS says the rate is 12.4% for Social Security and 2.9% for Medicare.

It is a different tax from income tax, and it pays for Social Security and Medicare. The IRS says you usually must pay it if you had net earnings from self-employment of $400 or more.

How it is figured

The tax applies to 92.35% of your net earnings from self-employment, which is your income after business expenses. You work it out on Schedule SE. The 12.4% Social Security part stops at a yearly wage base, which is $184,500 for 2026 (IRS Topic 751); Medicare has no limit.

You get one break back. The IRS lets you deduct one-half of your self-employment tax when you compute your adjusted gross income.

Planning for it

A client does not withhold it from a freelance payment, so the bill can arrive in one piece. A common habit is to move a share of every payment into a separate account at once. Treat the tax as a bill that is already due.

For a couple where one of you is self-employed, the other's paycheck has tax withheld through the Form W-4. The two together make the household total, so you may have to account for the self-employed side separately.

A worked example: $50,000 of net self-employment earnings

• Amount subject to the tax: $50,000 x 92.35% = $46,175.
• Rate: 12.4% + 2.9% = 15.3%.
• Self-employment tax: $46,175 x 15.3% = $7,064.78, about $7,065.
• Half is deductible when computing adjusted gross income: $7,065 / 2 = about $3,532.
• Per month, to set aside for this tax alone: $7,065 / 12 = about $589.