If you freelance, run a small business, or do gig work, the Self-Employment Tax is probably the single biggest surprise on your first tax return. Here's exactly what it is and how it's calculated.
What it actually replaces
When you're a W-2 employee, Social Security and Medicare tax (FICA) is split — you pay half, your employer pays half. When you're self-employed, there's no employer to share the cost with, so you pay both halves yourself through Self-Employment Tax (SE Tax): a combined 15.3% — 12.4% for Social Security (up to the wage base cap) and 2.9% for Medicare (no cap).
Calculate net earnings from self-employment
Take your business's net profit and multiply by 92.35% — this small adjustment accounts for the fact that the "employer half" of the tax isn't itself subject to SE tax.
Apply the 15.3% rate
12.4% Social Security applies up to the annual wage base ($176,100 for 2025); 2.9% Medicare applies to all self-employment income with no upper limit.
Add the Additional Medicare Tax if applicable
An extra 0.9% applies to self-employment income above $200,000 (single) or $250,000 (married filing jointly).
Worked example
| Item | Amount |
|---|---|
| Net business profit | $80,000 |
| Net earnings (× 92.35%) | $73,880 |
| SE Tax (15.3%) | ≈ $11,304 |
The deduction that helps
You can deduct half of your SE Tax as an above-the-line adjustment when calculating your Adjusted Gross Income — this mirrors the fact that a W-2 employee's employer-paid half isn't treated as the employee's taxable income either. It doesn't eliminate the extra cost, but it does soften it.
Calculate your exact Self-Employment Tax liability.
Use the Self-Employment Tax Calculator →Don't forget quarterly payments
Since nothing is withheld automatically from self-employment income, you'll generally need to make quarterly estimated tax payments covering both income tax and SE tax, to avoid an underpayment penalty at filing time.
This is a simplified walkthrough of the standard calculation. Specific situations — multiple businesses, partnership income, church employee income — have additional rules. Consult a CPA for guidance specific to your situation.