Self-Employment Tax.
In plain English
Self-employment tax is the combined Social Security and Medicare tax that you owe on your net self-employment income. When you have a W-2 job, you pay half of these taxes and your employer pays the other half. When you work for yourself, you pay both halves, which adds up to a statutory 15.3% (12.4% for Social Security plus 2.9% for Medicare). You can deduct the employer-equivalent half (about 7.65%) when figuring your income tax, which softens the blow a little.
01Why it matters
It is the tax that surprises new freelancers the most, because it stacks on top of regular income tax and can take a real bite out of every dollar you earn on your own.
02The math, step by step
Say your net self-employment profit is $50,000. The Social Security portion (12.4%) applies only up to the annual wage base cap, and the Medicare portion (2.9%) applies to all of it. With a profit under the cap, you would owe roughly 15.3% of about 92.35% of your profit, which works out to around $7,065. You can then deduct about half of that on your income tax return. The Social Security portion stops applying above the annual wage base, which is $184,500 for 2026.
03What this is NOT
Self-employment tax is not income tax. It is a separate payroll tax for Social Security and Medicare, and you can owe it even in a year when your income tax is zero.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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