← Guides

Self-Employment Tax Explained (US, 2026)

By Andrew James Flores, Nathan Management · Updated September 23, 2026 · Editorial Standards

If you work for yourself in the United States and your business shows a profit, you pay self-employment tax on top of income tax. It is how self-employed people pay into Social Security and Medicare, and it is figured on Schedule SE, which you attach to Form 1040. This guide gives the 2026 figures, explains every number the form uses, works the tax out at five profit levels, and shows how much of each billable hour it takes so you can price for it.

The 2026 numbers at a glance

The Social Security Administration sets the wage base each year. The 2026 figure, $184,500, is printed in IRS Form 1040-ES (2026), both in its What’s New section and on line 5 of its Self-Employment Tax and Deduction Worksheet. That is $8,400 more than the 2025 base of $176,100 shown on Schedule SE, line 7.

What 15.3%, 7.65% and 0.9235 mean

15.3% is two taxes added together: 12.4% for Social Security and 2.9% for Medicare. An employee pays half of each through paycheck withholding, 6.2% plus 1.45%, which is 7.65%, and the employer pays a matching 7.65% on top of the wage. When you work for yourself you are both parties, so you pay the full 15.3%.

0.9235 is the step most people skip. Before either rate is applied, Schedule SE multiplies your net profit by 92.35%, and the result is your net earnings from self-employment. 92.35% is 100% minus 7.65%. An employer’s half of payroll tax is never counted as part of the employee’s taxable pay, and the 92.35% step gives you the same treatment by taking your “employer” half out of the base first.

Put the two together and, below the wage base, self-employment tax comes to 15.3% × 92.35% = 14.13% of net profit. $10,000 of profit carries $1,412.96 of tax. Two shortcuts give the wrong answer. Applying 15.3% to gross receipts overstates the tax, because it is charged on profit after business expenses and after the 92.35% step. Treating the deduction for half the tax as money back misreads it, because that deduction lowers income tax, not self-employment tax.

How the tax is figured, step by step

Schedule SE and the Self-Employment Tax and Deduction Worksheet in the 2026 Form 1040-ES follow the same six steps. The line numbers below are Schedule SE’s.

1. Start with net profit from Schedule C, line 31: what clients paid you minus deductible business expenses. It goes on line 2.
2. Multiply by 92.35% (line 4a). If the result is under $400, stop: no self-employment tax is due (line 4c). It takes roughly $433 of net profit to reach $400.
3. Social Security: take the smaller of that figure or the part of the $184,500 wage base that wages from a job have not already used, and multiply by 12.4% (line 10).
4. Medicare: multiply the full step 2 figure by 2.9% (line 11). There is no cap.
5. Add steps 3 and 4. That is your self-employment tax (line 12). It carries to Schedule 2, line 4, and from there into the total tax on Form 1040.
6. Halve it (line 13) and subtract the half on Schedule 1, line 15, which lowers your adjusted gross income.

Example with assumed figures: net profit of $80,000 with no wages. $80,000 × 0.9235 = $73,880.00 of net earnings. Social Security: $73,880.00 × 12.4% = $9,161.12. Medicare: $73,880.00 × 2.9% = $2,142.52. Self-employment tax: $11,303.64, or $941.97 a month if you set it aside evenly. The deduction for half of it is $5,651.82.

Self-employment tax at five profit levels

Table 2 runs the same six steps at five levels of net profit, so you can find the row nearest your own year. On a phone, swipe the table sideways to see every column.

Up to $120,000 the tax is a steady 14.13% of profit. The $200,000 row is the first where the wage base matters: net earnings of $184,700 pass the $184,500 base by $200, so Social Security is charged on $184,500 only, $24.80 less than an uncapped 12.4% would be, and the share slips to 14.12%. None of these rows reaches the Additional Medicare Tax threshold for single, head-of-household or joint filers with no wages. A married person filing separately crosses the $125,000 threshold in the $200,000 row and owes that tax on top.

Where the wage base stops the 12.4%

With no wages, your net earnings reach the $184,500 base at about $199,783 of net profit ($184,500 ÷ 0.9235). Below that point, each extra $1,000 of profit adds about $141.30 of self-employment tax. Above it only the Medicare part applies, and each extra $1,000 adds about $26.78.

Wages from a job use up the base first. Schedule SE subtracts your Social Security wages and tips (Form W-2, boxes 3 and 7) from the base on line 9, and only what is left can be taxed at 12.4%. Table 3 holds freelance profit at $50,000 and changes the wages.

With a $60,000 salary the freelance profit is taxed in full, because wages and net earnings together stay under $184,500. At $150,000 of wages, only $34,500 of the $46,175 in net earnings is still under the base. At $184,500 of wages, the freelance profit pays Medicare only. In that last row wages and self-employment income together also pass $200,000, so a single filer there would owe the 0.9% Additional Medicare Tax as well, figured separately.

The deduction for half of the tax

Half of your self-employment tax is subtracted on Schedule 1, line 15, as an adjustment to income. It lowers adjusted gross income whether you take the standard deduction or itemize, and it reduces income tax only; the self-employment tax itself stays the same. The Additional Medicare Tax is outside it, because line 13 halves only the line 12 total of Social Security and Medicare.

In the $80,000 illustration the deduction is $5,651.82. If that income would otherwise be taxed at 22%, one of the 2026 rates in the Form 1040-ES rate schedules, the deduction saves $1,243.40 of federal income tax, and the net federal cost of the $11,303.64 self-employment tax becomes $10,060.24. At a different income-tax rate the saving scales in proportion.

Building self-employment tax into your rate

The calculator’s first field, “Personal income goal, before taxes ($/year)”, is the pay you want for yourself before income tax and self-employment tax. The calculator does not work out either tax; both are paid out of that goal. If every cost you enter in “Business operating costs ($/year)” is deductible and “Personal benefits budget ($/year)” is zero, your income goal is also your Schedule C net profit, so you can read the self-employment tax straight off Table 4.

At the calculator’s starting values ($75,000 goal, $5,000 of business costs, 25 billable hours a week, 4 weeks with no billing) the rate floor is $66.67 an hour, and $8.83 of every billed hour goes to self-employment tax. That is why a floor that looks generous next to a salary can still feel tight: part of it was never yours to spend.

Author’s practice: work backward from what you need. Below the wage base the tax is exactly 0.1412955 of profit (the 14.13% above, unrounded), so dividing what you want left after it by 0.8587045 gives the profit required. Wanting $60,000 after self-employment tax means $60,000 ÷ 0.8587045 = $69,872.70 of profit; the tax on that profit is $9,872.70, which leaves exactly $60,000.00. Enter that as a starting income goal, estimate income tax with the Form 1040-ES worksheet, and raise the goal if what remains after both taxes falls short of your spending plan.

Paying it during the year

There is no separate bill for self-employment tax. It is added to income tax on your return, and the same estimated payments cover both. The 2026 Form 1040-ES includes its own Self-Employment Tax and Deduction Worksheet, lines 1a to 11, with the $184,500 base already printed on line 5. Its line 10 total goes to line 9 of the Estimated Tax Worksheet, and its line 11 deduction is subtracted when you project adjusted gross income on line 1.

Once withholding and refundable credits are subtracted, a projected 2026 balance of $1,000 or more generally means quarterly payments are due, on April 15, 2026, June 15, 2026, September 15, 2026 and January 15, 2027. The 2026 estimated taxes guide walks through the whole worksheet, the safe-harbor amounts and a set-aside method for client payments.

LLC or S corporation?

A single-member LLC that has not chosen to be taxed as a corporation is disregarded for federal income tax: the owner reports its profit on Schedule C and pays self-employment tax exactly as shown above. Forming the LLC does not by itself change the tax.

An S corporation works differently. An owner who works in the business must be paid a reasonable wage through payroll, which carries Social Security and Medicare tax, and only profit beyond that wage can be paid out as a distribution. Whether the election saves money depends on the wage, payroll and bookkeeping costs, and your state’s rules. Author’s practice: ask a CPA for a side-by-side comparison built from your real numbers before electing.

Sources

• IRS — Schedule SE (Form 1040), 2025: lines 2, 4a, 4c, 7, 9 and 10 to 13.
• IRS — Instructions for Schedule SE (Form 1040).
• IRS — Form 1040-ES (2026): the $184,500 wage base set by the Social Security Administration, the Self-Employment Tax and Deduction Worksheet, the $1,000 test, the due dates and the 2026 rate schedules. See also About Form 1040-ES.
• IRS — Topic no. 554, Self-Employment Tax: the 12.4% and 2.9% parts, the 92.35% factor, the $400 threshold and the half-tax deduction.
• IRS — Self-Employment Tax (Social Security and Medicare Taxes): the 15.3% rate.
• IRS — Topic no. 560, Additional Medicare Tax: the 0.9% rate and its thresholds.
• BillMyRate rate formula (calculation source): the $66.67 floor and 1,200 billable hours used in Table 4. Tables 2 to 4 are computed from the Schedule SE steps on this page.

Run the calculator → · 2026 estimated taxes · More guides