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Self-Employment Tax Explained: How the 15.3% Works in 2026
The short answer: self-employment tax is 15.3%: 12.4% for Social Security and 2.9% for Medicare. It's charged on 92.35% of your net profit, so it works out to about 14% of profit. You owe it once profit reaches $400, and you can deduct half of it from your income.
Self-employment tax calculator
How it's calculated
- Start with your net profit from Schedule C (income minus business expenses).
- Multiply by 92.35%. This mirrors the employer share an employee never sees.
- Apply 12.4% Social Security tax, up to the 2026 wage base of $184,500.
- Apply 2.9% Medicare tax to all of it.
Example: $40,000 profit × 92.35% = $36,940. × 15.3% = $5,652 of self-employment tax.
Other rules to know
- The $400 rule: you owe self-employment tax and file Schedule SE if net self-employment earnings are $400 or more (IRS).
- Deductible half: you deduct the employer-equivalent half when figuring adjusted gross income. It lowers income tax, not self-employment tax.
- Additional Medicare tax: 0.9% more on earnings above $200,000 single or $250,000 married filing jointly.
- W-2 wages count toward the wage base, so a day job can reduce the Social Security part.
Legal ways to lower it
- Claim every business expense, since the tax is on profit. See deductions the self-employed miss.
- Log business miles at 72.5¢ (2026 mileage rate).
- Consider an S-corporation once profit is high enough (see LLC vs. S-corp: when it saves money). You pay yourself a reasonable salary and take the rest as distributions, which aren't subject to self-employment tax. It adds payroll and filing costs, so get professional advice.
Note: retirement contributions and health insurance premiums lower income tax but not self-employment tax. Plan for it with how much to set aside.
FAQ
What is the self-employment tax rate for 2026?
15.3%: 12.4% Social Security and 2.9% Medicare, on 92.35% of net profit. Social Security applies up to $184,500 for 2026.
Do I have to pay self-employment tax if I made under $400?
No. Self-employment tax applies when net earnings from self-employment are $400 or more.
Can I deduct self-employment tax?
You can deduct the employer-equivalent half when figuring adjusted gross income, which lowers income tax.
Sources: IRS: self-employment tax · 2026 Social Security wage base. General information for planning, not tax, legal or financial advice.