This guide is general information, not tax advice. Figures use 2026 IRS and Social Security amounts.
What self-employment tax is
It's Social Security and Medicare for people who work for themselves. An employee splits 15.3% with their employer; when you're self-employed you pay both halves: 12.4% for Social Security and 2.9% for Medicare.
Step-by-step example
A freelancer earns $60,000.00 in 2026 and spends $8,000.00 on business costs.
Step 1: Find net profit
$60,000.00 income − $8,000.00 expenses = $52,000.00. This is the bottom line of Schedule C. Business mileage counts as an expense here too.
Step 2: Multiply by 92.35%
$52,000.00 × 0.9235 = $48,022.00. This mirrors the employer half an employee never pays tax on.
Step 3: Apply 15.3%
$48,022.00 × 0.153 = $7,347.37 self-employment tax. The 12.4% Social Security part stops at the 2026 wage base of $184,500.00; the 2.9% Medicare part has no cap.
Step 4: Deduct half
Half, $3,673.68, is subtracted from your income before federal income tax is calculated. It lowers income tax, not the self-employment tax itself.
Things that change the number
- Every deductible expense lowers it by about 14 cents per dollar, before income tax savings.
- A W-2 job already paying Social Security reduces how much of the wage base is left.
- An extra 0.9% Medicare tax applies to earnings over $200,000 (single) or $250,000 (married filing jointly).
Where it goes on your return
You figure it on Schedule SE and carry it to Form 1040. During the year you pay it, along with income tax, through quarterly estimated payments.