Do I Have to Pay Self-Employment Tax?
Short answer
Generally yes, if your net earnings from self-employment are $400 or more for the year. Self-employment tax is 15.3% (12.4% Social Security plus 2.9% Medicare), applied to 92.35% of your net earnings. You can deduct half of it when figuring your adjusted gross income.
What self-employment tax is
When you work for an employer, Social Security and Medicare are split: half is withheld from your pay and your employer pays the other half. When you work for yourself, you pay both halves. That combined amount is self-employment tax, and it's separate from income tax.
Who has to pay it
The trigger is $400 or more in net earnings from self-employment for the year. That includes freelancers, independent contractors, gig workers, sole proprietors, and general partners in partnerships. If you're unsure whether you're a contractor or an employee, see 1099 vs. W-2 explained.
How it's calculated
- Start with your net profit (income minus business expenses).
- Multiply by 92.35% to get the amount subject to the tax.
- Apply 15.3%: 12.4% for Social Security (up to that year's wage base) and 2.9% for Medicare (no cap).
Higher earners may also owe a separate 0.9% Additional Medicare Tax above certain income thresholds.
The deduction for half
You can deduct one-half of your self-employment tax when figuring adjusted gross income. That lowers your income tax, though it doesn't reduce the self-employment tax itself.
The best way to lower it: legitimate expenses
Because the tax is based on net profit, every properly documented business expense reduces it. Review our list of small business tax deductions and make sure you're tracking mileage correctly.
Plan for it during the year
No one withholds this tax for you, so most self-employed people make quarterly estimated tax payments. Setting aside a fixed percentage of every payment you receive in a separate savings account makes those deadlines much easier.
Self-employed and unsure what you owe?
We’ll estimate your tax, set up quarterly payments, and look for deductions you may be missing.
Frequently asked questions
What is the self-employment tax rate?
15.3%, made up of 12.4% for Social Security and 2.9% for Medicare. It applies to 92.35% of net earnings from self-employment, and the Social Security part stops at an annual wage base.
How much do you have to make to pay self-employment tax?
You generally must pay self-employment tax if your net earnings from self-employment are $400 or more for the year.
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