Self-employment tax is the Social Security and Medicare tax you pay on your own business profit. The rate is 15.3% of your net earnings: 12.4% for Social Security and 2.9% for Medicare (IRS). No employer withholds it for you, so you report it on Schedule SE and usually pay it during the year with quarterly estimated payments. It is a separate bill from income tax.
Who pays it, and on how much
You owe self-employment tax when your net earnings from self-employment are $400 or more, and you need a Social Security number or an ITIN to pay it. Sole proprietors and independent contractors generally figure net earnings on Schedule C. An owner of a single-member LLC pays it the same way a sole proprietor does, according to the IRS.
The tax is not charged on your revenue and not quite on your profit. You take net profit (business income minus business expenses) and multiply it by 92.35%. That result is your net earnings, and the rates apply to it. This is the method in the Self-Employment Tax and Deduction Worksheet that comes with the 2026 Form 1040-ES (IRS).
| Piece | Rate | What it applies to (tax year 2026) |
|---|---|---|
| Social Security | 12.4% | Combined wages, tips and net earnings up to the wage base of $184,500 |
| Medicare | 2.9% | Net earnings; the wage base limit applies to the Social Security part |
| 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) |
Source: IRS self-employment tax page, reviewed October 30, 2026. Rates and thresholds can change, so check the IRS page for the year you are filing.
The Social Security wage base
The 12.4% Social Security part stops once your combined wages and net earnings reach the wage base for that year. The Social Security Administration lists $184,500 for 2026 and $192,300 for 2027 (SSA). Most small businesses never reach it, but if you also have a job, your wages count toward the same limit.
The tax is not just a cost. Your covered earnings build your Social Security record. SSA says you can earn up to four credits a year, and $1,890 of earnings buys one credit in 2026 (SSA). Both the wage base and the credit amount change every year, so check the SSA site rather than relying on last year's number.
Worked example with made-up numbers
The incomes below are invented to show the arithmetic. They are not typical, and they are not advice. Tax year 2026, no wages from any job.
| Step | Example A: $60,000 net profit | Example B: $250,000 net profit |
|---|---|---|
| 1. Net earnings (net profit x 92.35%) | $55,410.00 | $230,875.00 |
| 2. Social Security, 12.4% | $6,870.84 on all $55,410 | $22,878.00 on the $184,500 wage base only |
| 3. Medicare, 2.9% | $1,606.89 | $6,695.38 |
| 4. Self-employment tax (2 + 3) | $8,477.73 | $29,573.38 |
| 5. Deductible half of that tax | $4,238.87 | $14,786.69 |
Example B shows the wage base at work: without the cap, Social Security would have been $28,628.50, so the cap saves $5,750.50. The Additional Medicare Tax is left out of both examples. The half deduction in step 5 lowers your income tax, not your self-employment tax.
To turn this into a quarterly payment, remember that the estimate must cover income tax as well. In Example A, one quarter of the self-employment tax alone is about $2,119, but your real payment is that plus a quarter of your expected income tax, which depends on your filing status, other income and deductions. The worksheet in Form 1040-ES walks through it.
Quarterly estimated payments: who must pay and when
For tax year 2026, you generally must make estimated payments if you expect to owe at least $1,000 after withholding and refundable credits, and your withholding will be less than the smaller of 90% of your 2026 tax or 100% of your 2025 tax. If your 2025 adjusted gross income was over $150,000 ($75,000 if married filing separately), the prior-year test uses 110% instead of 100%. Paying at least the smaller amount is what generally keeps you clear of the underpayment penalty (IRS estimated taxes).
| Payment | Due date for tax year 2026 |
|---|---|
| 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 |
A due date that lands on a weekend or legal holiday moves to the next business day. Dates for 2027 and later years are printed on that year's Form 1040-ES, so confirm them at irs.gov, because the schedule is set year by year. If your income is uneven, such as a seasonal business, you may be able to lower or avoid the penalty by annualizing income and making unequal payments. You can also pay weekly, biweekly or monthly as long as enough is paid in by the end of each quarter, according to the IRS.
How to pay, step by step
- Estimate the year. Use the worksheet in Form 1040-ES with your expected net profit. Result: one number for the year and a number per quarter.
- Pick a payment method. The IRS lists its online account, IRS Direct Pay (free, from a bank account), debit or credit card or digital wallet (the processor charges a fee), EFTPS (free, but you must enroll first), the IRS2Go app, cash through approved retail partners, or a check with the payment voucher.
- Pay before the due date and save the confirmation. For a mailed payment, the postmark date counts. Write "2026 Form 1040-ES" and your Social Security number on a check.
- Adjust next quarter. If your income runs higher or lower than you guessed, redo the worksheet and change the next payment.
Mistakes that cost sole proprietors money
- Using revenue instead of net profit. Subtract business expenses first, then apply the 92.35%.
- Skipping payments because you plan to settle when you file. Check the 90% and 100% tests above first, because they are what keep you clear of the underpayment penalty.
- Forgetting the tax when pricing. Your rate has to leave room for it. The hourly rate guide shows how to build that in.
- Assuming an LLC removes it. A default single-member LLC pays the same tax. Only a different setup, such as an S corporation, changes how the owner's pay is taxed. The LLC vs sole proprietorship vs S corp guide explains the trade-offs.
The numbers on this page are for tax year 2026 and come from IRS and SSA pages. Check the official sites each year, because they change every year, and consider a tax professional if your income is high or irregular.
Frequently asked questions
What is the self-employment tax rate?
It is 15.3%: 12.4% for Social Security and 2.9% for Medicare. It applies to your net earnings, which are 92.35% of your net profit, and the 12.4% part stops at the annual wage base ($184,500 for 2026).
Do I have to pay quarterly estimated taxes?
Generally yes, if you expect to owe at least $1,000 for the year after withholding and refundable credits, and your withholding will be less than the smaller of 90% of this year's tax or 100% of last year's. Higher-income filers use 110% of last year's tax.
Do I owe self-employment tax if I also have a regular job?
Yes, if your net earnings from self-employment are $400 or more. Your wages count toward the same Social Security wage base, so the cap may be reached sooner.
Can I deduct self-employment tax?
You can deduct the employer-equivalent half of it when figuring adjusted gross income. That lowers your income tax, but not the self-employment tax itself.
Sources: IRS: Self-employment tax (Social Security and Medicare taxes) · IRS: 2026 Form 1040-ES, Estimated Tax for Individuals · IRS: Estimated taxes · SSA: 2027 Social Security Changes (fact sheet with 2026 and 2027 figures) · SSA: How do I earn Social Security credits? · SBA: Pay taxes · IRS: Single member limited liability companies
