Working-alone guide

Self-employment tax and net earnings, explained without the jargon

Tax-year note: Tax information on this page applies to the 2026 tax year (returns filed in 2027), from IRS pages checked in November 2026. Figures and dates are labelled with their tax year where they appear. Check current IRS pages before you rely on them.

When you work for an employer, Social Security and Medicare taxes are split. Half comes out of your pay; the employer pays the other half. When you work for yourself, you are both sides of that arrangement, and the tax that covers it is called self-employment tax. This guide explains what it is, the 2026 tax year figures the IRS publishes, and the one concept that matters most: net earnings. It is general information, not tax advice; figures change each year.

What the tax covers

The IRS describes self-employment tax as a tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. It is separate from income tax, and it is figured on Schedule SE.

That separation surprises people. A self-employed person can owe self-employment tax even when their income tax is low, because the two are calculated differently.

The 2026 tax year figures

From the IRS self-employment tax page, for the 2026 tax year:

• Rate: 15.3% (2026 tax year), made up of 12.4% for Social Security and 2.9% for Medicare.
• Filing threshold: $400 (2026 tax year). You must pay self-employment tax and file Schedule SE if net earnings from self-employment were $400 or more, with special rules for church employee income.
• Social Security wage base: $184,500 (2026 tax year). The 12.4% Social Security part applies only to the first $184,500 of combined wages, tips and net earnings. The Medicare part has no such cap.
• Deduction: you can deduct the employer-equivalent portion of self-employment tax when figuring adjusted gross income. That deduction affects income tax only, not the self-employment tax itself.

Higher earners can owe additional Medicare tax under separate rules; the IRS self-employed tax center links the details.

Net earnings: the word that does the work

Self-employment tax is figured on net earnings from self-employment, not on what clients paid you. For most sole proprietors, the starting point is net profit from Schedule C: gross receipts minus allowable business expenses. Schedule SE then applies its own steps to arrive at the amount the tax is figured on.

Two practical consequences:

1. Expenses matter twice. A legitimate business expense reduces profit, which reduces both income tax and self-employment tax.
2. Records are the evidence. If you cannot show an expense, it is hard to claim. A running ledger of receipts and payments is worth more than any year-end estimate.

If you also have a job

Wages and self-employment earnings share the Social Security wage base. For the 2026 tax year, if your wages already reached $184,500, the 12.4% part does not apply to your self-employment earnings, though the 2.9% Medicare part still does (2026 tax year figures). If your wages are below that, the base is shared. Schedule SE handles the arithmetic.

Paying during the year

Self-employment tax is not withheld from client payments. The IRS estimated tax page says estimated tax covers self-employment tax as well as income tax. See the estimated tax calendar for the 2026 tax year due dates.

Why this site leaves tax out of its calculators

The quote floor on this site works in pretax terms and does not estimate tax. That is deliberate: the right reserve depends on your whole return. Use your quote floor to cover costs and your chosen pay, then plan tax separately with the IRS worksheets or a professional.

Common misreadings

• "I got no 1099, so no tax." Reporting forms and tax obligations are separate. Income is reportable whether or not a form arrives.
• "The rate applies to everything I invoice." It applies to net earnings, after the steps on Schedule C and Schedule SE.
• "It is the same as income tax." It is a separate tax, figured separately, and both can apply.
• "Last year's numbers still apply." The wage base changes every year. Use the figures for the tax year you are filing.

Where to look next

The IRS self-employed individuals tax center gathers forms, deadlines and guidance. Each route page in this directory links it under its references. If your situation includes partnerships, an S corporation election, or large changes in income, a tax professional can explain how the rules apply to you.