For freelancers, contractors, and small business owners calculating how much to set aside for taxes.
The self-employment tax rate is 15.3% in 2026 (12.4% Social Security plus 2.9% Medicare). It applies to 92.35% of your net self-employment income. On $80,000 net profit, you owe roughly $11,300 in SE tax before any income tax.
Self-employment tax is the freelancer and contractor equivalent of FICA payroll taxes. When you work as an employee, your employer pays half of Social Security and Medicare taxes. When you work for yourself, you pay both halves, which is why the rate is 15.3% rather than the 7.65% you see withheld from a paycheck.
The tax applies to 92.35% of your net profit, not your gross revenue. The 7.65% reduction is an IRS adjustment that mimics the employer deduction. So if you made $100,000 net after business expenses, the taxable base for SE tax is $92,350, not $100,000.
The Social Security portion (12.4%) only applies up to the wage base, which is $176,100 for 2026. Income above that threshold is still subject to the 2.9% Medicare tax with no cap. High earners above $200,000 (single filers) also owe an additional 0.9% Medicare surtax on the excess, making their Medicare rate 3.8% on that portion.
| Component | Rate | Applies To |
|---|---|---|
| Social Security | 12.4% | Income up to $176,100 |
| Medicare | 2.9% | All net SE income |
| Additional Medicare surtax | 0.9% | Income above $200K (single) / $250K (married) |
| Total (under wage base) | 15.3% | Applied to 92.35% of net income |
Self-employment tax is separate from income tax. Most self-employed individuals owe both. A freelancer in the 22% income tax bracket with $80,000 in net income could owe roughly $11,300 in SE tax plus $8,000 to $12,000 in federal income tax, for a combined federal burden of $19,000 to $23,000. Setting aside 28 to 30% of net income is a commonly recommended starting point for quarterly estimates.
Self-employment tax is the Social Security and Medicare tax that self-employed individuals pay directly to the IRS. Unlike employees who split these taxes with an employer, sole proprietors and independent contractors pay the full 15.3% themselves. The 2026 Social Security wage base is $176,100.
Calculate your exact SE tax and quarterly payments in 30 seconds
Use the Free Self-Employment Tax Calculator →The SE tax rate is 15.3% in 2026. This is 12.4% for Social Security (capped at $176,100 in income) plus 2.9% for Medicare (no cap). The rate has not changed from 2025. It applies to 92.35% of your net profit, not your gross revenue.
Multiply net income by 92.35%, then multiply the result by 15.3%. For $80,000 net: $80,000 x 0.9235 = $73,880 base, then $73,880 x 0.153 = $11,304 in SE tax. This is filed on Schedule SE alongside your Form 1040 each year.
Yes, SE tax is entirely separate from federal income tax. You owe both on your self-employment earnings. Many freelancers are caught off guard when their effective combined rate reaches 30 to 40% after accounting for both taxes, especially as income crosses into higher brackets.
Yes. The IRS lets you deduct 50% of your SE tax as an above-the-line deduction on Form 1040 Line 15. This reduces your adjusted gross income, which lowers your income tax. On $11,304 in SE tax, you can deduct $5,652. It does not reduce the SE tax itself.
The 2026 Social Security wage base is $176,100. The 12.4% Social Security tax only applies to net SE income up to this amount. Income above $176,100 is still subject to the 2.9% Medicare tax, plus the 0.9% surtax if your total income exceeds $200,000 (single) or $250,000 (married).
No. Net self-employment income below $400 is exempt from SE tax. This is the net profit after subtracting all business expenses from gross revenue, not the gross amount itself. If your expenses reduce net profit below $400, no SE tax is owed for that year.
Set aside 25 to 35% of net income to cover both SE tax and income tax. A simpler breakdown: 15.3% for SE tax, plus your income tax bracket rate. Pay quarterly using Form 1040-ES by April 15, June 15, September 15, and January 15 to avoid underpayment penalties.
Self-employed individuals with income above $200,000 (single) or $250,000 (married) owe an extra 0.9% Medicare surtax on the amount exceeding those thresholds. This is not deductible. Combined with the base Medicare rate, high earners pay 3.8% Medicare on income above the threshold.
Calculate SE tax on Schedule SE and report it on Form 1040. To avoid underpayment penalties, make quarterly estimated payments using Form 1040-ES. Due dates are April 15, June 15, September 15, and January 15. You can pay online at IRS Direct Pay or EFTPS.
A single-member LLC taxed as a sole proprietorship pays SE tax on all net profits. An LLC electing S-Corp status can reduce SE tax by splitting income into a reasonable W-2 salary (subject to SE tax) and distributions (not subject to SE tax). The savings can be significant once net profit exceeds $40,000 to $50,000.
This content is for informational purposes only and does not constitute financial, legal, or tax advice. Tax rates, wage bases, and thresholds can change. Consult a qualified tax professional for guidance specific to your situation.