Self-employment
Self-employment tax: the 15.3% rate, 2026 wage base and how to figure it
Self-employment tax is 15.3% (12.4% Social Security plus 2.9% Medicare) on 92.35% of net earnings. See the 2026 $184,500 wage base, the $400 filing rule, the deduction for half and worked examples with IRS sources.
Prepared by Aldro Accounting · Updated · Sources checked
The quick answer
Self-employment tax is the Social Security and Medicare tax people who work for themselves pay, figured on Schedule SE (Form 1040). The IRS rate is 15.3%: 12.4% for Social Security on the first $184,500 of combined wages, tips and net earnings in 2026, plus 2.9% for Medicare on all net earnings. It generally applies to 92.35% of net earnings once those reach $400, and half of the tax is deductible when figuring adjusted gross income.
What self-employment tax is
The IRS describes self-employment tax as a tax made up of Social Security and Medicare taxes, mainly for people who work for themselves. It is similar to the Social Security and Medicare taxes withheld from most wage earners' pay. The difference is who figures it. Employers figure it for employees. Self-employed people figure it themselves on Schedule SE (Form 1040).
It is separate from income tax. The Social Security Administration uses the information from Schedule SE to figure benefits under the Social Security program.
- Sole proprietors, including independent contractors
- Members of a single-member LLC that is disregarded for federal income tax
- Partners in a partnership, including members of a multi-member LLC treated as a partnership
- Members of a qualified joint venture
- Anyone otherwise in business for themselves, including gig workers who report on Schedule C
Who must pay it: the $400 rule
You must pay self-employment tax and file Schedule SE if your net earnings from self-employment, not counting church employee income, were $400 or more. The rule also applies if you had church employee income of $108.28 or more.
Age doesn't matter. The rules apply no matter how old you are, and even if you already receive Social Security or Medicare. To pay the tax you need a Social Security number (SSN) or an individual taxpayer identification number (ITIN).
The self-employment tax rate for 2026
The rate is 15.3%. It has two parts: 12.4% for Social Security (old-age, survivors and disability insurance) and 2.9% for Medicare (hospital insurance).
For 2026, the 12.4% Social Security part applies to the first $184,500 of your combined wages, tips and net earnings. If your wages and tips subject to Social Security tax already total at least $184,500, you don't pay the 12.4% part on any of your net earnings. The 2.9% Medicare part has no cap and applies to all net earnings.
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| Part | Rate | Applies to |
|---|---|---|
| Social Security | 12.4% | First $184,500 of combined wages, tips and net earnings |
| Medicare | 2.9% | All net earnings, no cap |
| Additional Medicare tax | 0.9% | Income above $200,000 (single, head of household, qualifying surviving spouse), $250,000 (married filing jointly) or $125,000 (married filing separately) |
An additional 0.9% Medicare tax applies when wages, compensation or self-employment income, together with a spouse's on a joint return, exceed the threshold for your filing status. It is figured on Form 8959. Fiscal-year filers use the rate and earnings limit in effect at the start of their tax year for the whole year.
How to figure self-employment tax, step by step
Generally, the amount subject to self-employment tax is 92.35% of your net earnings from self-employment. Net earnings are your gross trade or business income minus ordinary and necessary business expenses. A sole proprietor's net profit is on Schedule C, line 31.
The IRS's 2026 Self-Employment Tax and Deduction Worksheet in the Form 1040-ES instructions follows these steps:
- Start with your expected net profit subject to self-employment tax
- Multiply it by 92.35% (0.9235)
- Multiply that amount by 2.9% for the Medicare part
- Subtract your expected wages subject to Social Security tax from $184,500. If the result is zero or less, there is no Social Security part
- Take the smaller of the 92.35% amount or that result, and multiply it by 12.4% for the Social Security part
- Add the two parts. That is your self-employment tax
- Multiply the tax by 50%. That is your deduction for self-employment tax on Schedule 1 (Form 1040), line 15
The deduction for half of self-employment tax
You can deduct the employer-equivalent portion of your self-employment tax when figuring adjusted gross income. The IRS puts it at one-half of the tax. You calculate it on Schedule SE and claim it on Schedule 1 (Form 1040). Wage earners can't deduct their Social Security and Medicare taxes.
The deduction affects income tax only. It doesn't lower your net earnings from self-employment or the self-employment tax itself.
Self-employed people can also take an income tax deduction for the cost of health insurance. The IRS says that deduction is taken into account when calculating net earnings from self-employment.
If you had a loss or a small profit
Schedule SE has two optional methods for figuring net earnings. The IRS says one may help if you had a loss or a small amount of self-employment income. An optional method may give you credit toward Social Security coverage, or increase your earned income credit or child and dependent care credit. The Instructions for Schedule SE say who qualifies.
How to file and pay
Each year, a sole proprietor reports business income or loss on Schedule C and figures the tax on Schedule SE. If you owe self-employment tax, attach Schedule SE and Schedule 2 to Form 1040, 1040-SR or 1040-NR. The deduction for half goes on Schedule 1.
Estimated tax payments during the year cover self-employment tax as well as income tax. Individuals, including sole proprietors and partners, generally have to make estimated payments if they expect to owe $1,000 or more when they file. Form 1040-ES is used to figure and pay them.
Most taxpayers avoid the underpayment penalty if they owe less than $1,000 after withholding and credits, or paid at least 90% of the current year's tax or 100% of the prior year's tax, whichever is smaller. If your 2025 adjusted gross income was more than $150,000 ($75,000 if married filing separately for 2026), the 2026 Form 1040-ES uses 110% instead of 100% of the prior year's tax.
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| Payment | Due date |
|---|---|
| 1st | April 15, 2026 |
| 2nd | June 15, 2026 |
| 3rd | September 15, 2026 |
| 4th | January 15, 2027 (not required if you file your 2026 return by February 1, 2027, and pay the full balance with it) |
If a due date falls on a Saturday, Sunday or legal holiday, a payment made the next business day is on time.
Late filing and late payment penalties
The failure-to-file penalty is 5% of the unpaid tax for each month or part of a month a return is late, up to 25%. For returns due after December 31, 2025, a return more than 60 days late has a minimum penalty of $525 or 100% of the unpaid tax, whichever is less.
The failure-to-pay penalty is 0.5% of the unpaid tax for each month or part of a month it stays unpaid, up to 25%.
Aldro's flat yearly price covers everything tax for the year. Our team prepares and files Schedule C, the owner's Form 1040 with Schedule SE when the business income needs it, and sends quarterly estimate reminders.
Worked example
A freelancer with $40,000 of net profit on Schedule C and no wages in 2026: 92.35% of $40,000 = $36,940. Medicare part: 2.9% of $36,940 = $1,071.26. Social Security part: $36,940 is under the $184,500 limit, so 12.4% of $36,940 = $4,580.56. Self-employment tax: $5,651.82. Half of it, $2,825.91, is deductible on Schedule 1, line 15. Now a person with $170,000 of W-2 wages and the same $40,000 side profit: the Medicare part is still $1,071.26. For Social Security, $184,500 minus $170,000 = $14,500 of room is left, which is smaller than $36,940, so 12.4% of $14,500 = $1,798. Self-employment tax: $2,869.26, and the deduction for half is $1,434.63. With wages of $184,500 or more, the Social Security part would be zero and only the 2.9% Medicare part would apply.
Common questions
What is the self-employment tax rate for 2026?
15.3%: 12.4% Social Security on the first $184,500 of combined wages, tips and net earnings, plus 2.9% Medicare on all net earnings. A 0.9% additional Medicare tax applies above $200,000 for single filers, $250,000 for married filing jointly and $125,000 for married filing separately.
How much is self-employment tax on my profit?
Generally 15.3% of 92.35% of net earnings, until the Social Security part reaches the $184,500 limit. On $40,000 of net profit with no wages, that is $5,651.82 for 2026.
How much can I earn before I owe self-employment tax?
You must pay it and file Schedule SE once net earnings from self-employment reach $400. For church employee income the threshold is $108.28.
Why is self-employment tax figured on 92.35% of net earnings?
That is the IRS rule. Generally, the amount subject to self-employment tax is 92.35% of net earnings from self-employment, and the Schedule SE worksheet multiplies net profit by 0.9235 before applying the 12.4% and 2.9% rates.
Do I still owe self-employment tax if I have a W-2 job or get Social Security?
Yes. It applies at any age and even if you already receive Social Security or Medicare. W-2 wages subject to Social Security tax count toward the $184,500 limit, so they can shrink or remove the 12.4% part, but the 2.9% Medicare part applies to all net earnings.
When are 2026 estimated payments for self-employment tax due?
April 15, 2026, June 15, 2026, September 15, 2026 and January 15, 2027. The January payment isn't required if you file your 2026 return by February 1, 2027, and pay the full balance with it.
The cheapest way to get your business taxes done: $399 flat.
Business tax filing is $399 USD a year, and it covers everything tax for that year.
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What's included
$399 a year covers everything tax for that tax year.
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Sources
- IRS: Self-employment tax (Social Security and Medicare taxes) · checked October 31, 2026
- IRS: Topic no. 554, Self-employment tax · checked October 31, 2026
- IRS: About Schedule SE (Form 1040) · checked October 31, 2026
- IRS: Form 1040-ES (2026), Estimated Tax for Individuals · checked October 31, 2026
- IRS: Estimated taxes · checked October 31, 2026
- IRS: Self-employed individuals tax center · checked October 31, 2026
- IRS: Failure to file penalty · checked October 31, 2026
- IRS: Failure to pay penalty · checked October 31, 2026
This guide explains general rules from the sources listed. It isn’t tax advice for your situation.