Self-Employment Tax in 2026: Rates, Deductions & How to Pay

What the self-employment tax rate is

When you work for an employer, you and your employer split the Social Security and Medicare taxes on your paycheck. When you work for yourself, you're both the employee and the employer — so you pay both halves yourself. That combined amount is the self-employment tax.

The rate is 15.3% total: 12.4% for Social Security and 2.9% for Medicare^[1]. That's the same combined rate an employer and employee pay together — 6.2% + 6.2% for Social Security, and 1.45% + 1.45% for Medicare^[2].

How the math works

You don't pay self-employment tax on your full gross receipts — you pay it on your net earnings from self-employment. The IRS defines that as 92.35% of your net profit (your self-employment income after business expenses)^[1]. That 92.35% adjustment accounts for the employer's half that a W-2 worker never sees in their paycheck.

Here's what that looks like at four income levels, rounded to the nearest dollar. Social Security is capped at the $184,500 wage base for 2026^[3], while Medicare keeps applying no matter how much you earn.

The Social Security column shows the cap in action: at $200,000 of net profit, the 12.4% rate stops at the $184,500 wage base, so the Social Security portion is $22,878 rather than 12.4% of the full amount^[3]. Medicare, by contrast, applies to the entire $184,700 of net earnings.

The extra Medicare tax for high earners

There's one more layer for higher incomes. On top of the 2.9% Medicare tax, you owe an additional 0.9% Medicare tax on self-employment income above $200,000 if you're single or head of household, $250,000 if married filing jointly, or $125,000 if married filing separately^[4]. Unlike the wage base, these thresholds aren't indexed to inflation, so they stay the same year to year.

The additional Medicare tax is calculated only on the amount over the threshold. If you're single with $230,000 of net earnings, you'd owe 0.9% on the $30,000 above $200,000 — an extra $270 — on top of the standard 2.9% Medicare tax on the whole amount.

The half you can deduct

There's a small consolation: you can deduct half of your self-employment tax as an above-the-line adjustment to income on Schedule 1 of Form 1040^[1]. This mimics the employer's share that would have been deductible if someone else were paying it, and it lowers your income tax — though it doesn't reduce the self-employment tax itself.

Because the deduction is "above the line," you can claim it even if you take the standard deduction rather than itemizing. For a freelancer owing $14,130 in self-employment tax on $100,000 of net profit, the deductible half is $7,065, which directly lowers their adjusted gross income for income-tax purposes.

How and when to pay

There's no withholding from a client's payment, so the IRS expects you to prepay through quarterly estimated tax payments. As a general rule, you must pay estimated tax if you expect to owe $1,000 or more in tax after subtracting withholding and refundable credits^[5]. Estimated payments are due four times a year, typically in April, June, September, and January.

You pay both your income tax and your self-employment tax through those quarterly payments. If you skip them and owe at filing time, you can face an underpayment penalty. A common approach for freelancers is to set aside 25–30% of net profit in a separate account so the quarterly bill doesn't catch you off guard.

You can also request that a W-2 job's withholding be increased to cover your self-employment income, which counts as withholding and avoids the need for separate quarterly payments. Either way, the goal is the same: keep your prepayments close to your actual liability so there are no surprises in April.

FAQ

Is the self-employment tax the same as income tax?

No. Income tax is calculated on your taxable income at your marginal brackets. The self-employment tax is a separate 15.3% tax that funds Social Security and Medicare. You pay both — the self-employment tax on top of your regular income tax.

Do I owe self-employment tax on a side gig?

Generally yes, if your net earnings from self-employment are $400 or more in a year. Even a small side hustle can trigger the filing requirement, so track your income and expenses from the first dollar.

How do I reduce my self-employment tax?

Deduct legitimate business expenses first — every dollar of expense lowers your net profit, which is what the 15.3% applies to. You can also deduct half the tax itself, and retirement accounts like a SEP IRA or solo 401(k) can lower your taxable income.

Is the $184,500 Social Security cap new?

The cap changes most years. For 2026, the contribution and benefit base is $184,500, up from $176,100 in 2025^[3]. Only the Social Security portion is capped; Medicare applies to all your net earnings.