What is self-employment tax?
When you work for an employer, they pay half of your Social Security and Medicare taxes. When you work for yourself, you pay both halves. That total is the self-employment (SE) tax, a flat 15.3% on most of your net profit: 12.4% for Social Security and 2.9% for Medicare.
How the calculation works
First subtract business expenses from income to get net profit. Multiply that by 92.35%, then apply the 12.4% rate up to the yearly Social Security wage base and 2.9% to the full amount. Add the two. Half of the result is deductible when you work out income tax.
Who needs to pay it?
Freelancers, contractors, gig workers and sole proprietors with net earnings of $400 or more. High earners may owe an extra 0.9% Medicare tax, which this simple calculator does not include.
How to lower your bill
Track every legitimate expense: software, equipment, a home office, mileage and professional fees. Retirement contributions and health insurance premiums can reduce income tax, although they do not reduce SE tax itself.
Plan quarterly payments
The IRS expects estimated payments four times a year. Setting money aside each month avoids a nasty surprise and penalties. Income tax comes on top of SE tax, so talk to a tax professional for your full picture.
Frequently asked questions
What is the self-employment tax rate?
15.3% on 92.35% of net profit, split into 12.4% Social Security and 2.9% Medicare.
Does this include income tax?
No. It only estimates self-employment tax.
Is this tax advice?
No. It is an estimate; consult a tax professional.