Self-employment tax in 2026: rates, wage base and how to calculate it
Updated October 22, 2026 · By the Solo Tax Optimizer team · Not tax advice
If you work for yourself, as a freelancer, independent contractor, gig worker or sole proprietor, you pay self-employment tax on your profit. It is how self-employed people pay into Social Security and Medicare, and for many people it is a bigger bill than federal income tax.
This guide explains how the tax works for 2026, how to calculate it, and the legal ways to reduce it.
What is self-employment tax?
Employees and employers each pay 7.65% of wages in Social Security and Medicare taxes (often called FICA taxes). When you are self-employed you are both the employee and the employer, so you pay both halves: a total of 15.3%.
| Part | Rate | 2026 limit |
|---|---|---|
| Social Security | 12.4% | Applies up to the $184,500 wage base |
| Medicare | 2.9% | No limit |
| Additional Medicare Tax | 0.9% | On earnings above $200,000 (single) or $250,000 (married filing jointly) |
The Social Security wage base is shared with any W-2 wages you earn. The Additional Medicare Tax thresholds are also based on combined wages and self-employment income, and they are not adjusted for inflation.
How to calculate self-employment tax
You calculate the tax on Schedule SE, filed with your Form 1040. The basic steps are:
- Find your net profit. This is your business income minus deductible business expenses, usually from Schedule C.
- Multiply by 92.35%. This gives your net earnings from self-employment. The reduction mirrors the way an employer deducts its half of payroll tax, so you are not taxed on that half.
- Apply 12.4% to the part of that amount below the Social Security wage base (minus any W-2 wages).
- Apply 2.9% to all of it for Medicare.
- Add the 0.9% Additional Medicare Tax if your earnings are above the threshold. This part is calculated on Form 8959.
Worked example: $80,000 of profit
Say you are single, have no W-2 job, and your freelance business made $80,000 of net profit in 2026.
| Net profit | $80,000 |
| × 92.35% = net earnings from self-employment | $73,880 |
| × 15.3% = self-employment tax | $11,304 |
| Deduction for half of self-employment tax | $5,652 |
That $11,304 is owed on top of federal income tax. You can deduct half of it, $5,652, when working out your adjusted gross income. The deduction lowers your income tax but not the self-employment tax itself.
The half-of-SE-tax deduction
Employers deduct their share of payroll taxes as a business expense. To keep things even, self-employed people can deduct half of their self-employment tax on Schedule 1 of Form 1040. You get this deduction whether or not you itemize. It also slightly reduces your Qualified Business Income (QBI) deduction, because QBI is reduced by this amount.
How to pay it
Nobody withholds self-employment tax from your income, so you are expected to pay it during the year through quarterly estimated tax payments, together with your income tax. If you also have a W-2 job, you can instead increase the federal withholding from your paycheck to cover it.
Legal ways to reduce self-employment tax
- Claim every legitimate business expense. Self-employment tax is based on net profit, so each deductible expense reduces it by about 14 cents per dollar. See our checklist of self-employed deductions.
- Consider an S-Corp election. As an S-Corp owner, you pay payroll tax on a reasonable salary but not on the distributions you take on top of it. Once the savings outweigh the extra costs, this can save thousands a year. See when an S-Corp election makes sense.
- Know which deductions don't help. Retirement contributions and the self-employed health insurance deduction lower your income tax but not your self-employment tax. They are taken on Form 1040, not in calculating net profit.
Common mistakes
- Budgeting only for income tax and being surprised by self-employment tax at filing time.
- Applying 15.3% to all of your profit instead of to 92.35% of it.
- Forgetting that W-2 wages count toward the Social Security wage base.
- Mixing personal and business expenses, which makes it harder to defend deductions.
Frequently asked questions
Do I have to pay self-employment tax if I made less than $400?
No. You generally owe self-employment tax only when your net earnings from self-employment are $400 or more for the year. Different rules apply to church employee income.
Is self-employment tax the same as income tax?
No. Self-employment tax pays for Social Security and Medicare. Income tax is a separate tax on your taxable income. Most self-employed people owe both, and both are usually paid through quarterly estimated tax payments.
Does having a W-2 job reduce my self-employment tax?
It can. The 12.4% Social Security part only applies until your combined W-2 wages and self-employment earnings reach the $184,500 wage base for 2026. If your W-2 wages already use up some of that limit, less of your self-employment income is taxed for Social Security. The 2.9% Medicare part still applies to all of it.
This guide explains general federal tax rules for the 2026 tax year. It is not tax, legal or financial advice. Your situation may differ, so talk to a qualified tax professional before acting on it.