Tax year 2026 · United States federal
Self-employment tax explained
Self-employment tax is 15.3% of 92.35% of your net profit. irs.gov The Social Security half stops at $184,500 of earnings; the Medicare half never stops. ssa.gov
Three qualifications on a number most articles print bare, and each one changes what you actually pay.
What it is, and why it exists
An employee and their employer each pay 7.65% toward Social Security and Medicare. Working for yourself, you are both, so you pay 15.3% — 12.4% for Social Security and 2.9% for Medicare. irs.gov
It is not an extra tax on freelancers. It is the same tax, with the half your employer used to pay now visible on your own return.
The 92.35% nobody mentions
Only 92.35% of net profit is subject to it, because the employer-equivalent half of the 15.3% comes out of the base first. irs.gov
So the effective rate on profit is about 14.13%, not 15.3%. On $75,000 that is the difference between $11,475 and $10,597 — $878 that a calculator skipping the step will tell you to send the IRS.
| Net profit | Self-employment tax | Effective rate |
|---|---|---|
| $40,000 | $5,652 | 18.6% |
| $75,000 | $10,597 | 20.7% |
| $120,000 | $16,955 | 23.7% |
| $199,784 | $28,229 | 26.7% |
| $300,000 | $31,606 | 30.7% |
The ceiling, and what happens just past it
The Social Security portion applies only to the first $184,500 of earnings for 2026. ssa.gov Because of the 92.35% adjustment, you reach it at $199,783 of net profit.
What happens at that point is the most useful thing on this page:
Nothing else in the US tax system behaves like this. Every income tax bracket goes up as you earn more; this one falls by more than eleven points at a single threshold. The wage base cap covers what that means in practice — including for anyone deciding whether to take on one more project in December.
Half of it comes back
The employer-equivalent half is deductible against income tax, above the line, whether or not you itemise. irs.gov
A deduction reduces the income the tax is computed on; it is not a credit. The deductible half works through why that distinction costs people money when they budget.
If you also have a salary
The Social Security ceiling is shared across everything you earn, not applied separately to each source. A salary consumes it first.
Someone whose salary already fills the wage base pays no Social Security tax at all on their freelance income. W-2 and 1099 in the same year covers the interaction, including what happens with withholding and the safe harbor.
Your own numbers
Everything in this cluster
- Why it is not 15.3% — the rate applies to 92.35% of profit, so the real figure is 14.13%
- The Social Security wage base cap — the ceiling, and the marginal rate cliff at it
- W-2 and 1099 in the same year — a shared ceiling and what it saves
- The deductible half — a deduction is not a refund
- The QBI deduction — up to a fifth off, with a new minimum introduced for this tax year irs.gov
- How filing status affects your tax — the SE tax does not move, the income tax does
Where this stops
Self-employment tax applies to net earnings from a trade or business. It does not apply to rental income in most cases, to capital gains, to interest and dividends, or to income from an S-corp taken as a distribution rather than salary — which is the entire basis of the S-corp argument, and a decision with more moving parts than a rate comparison. Counted properly it starts paying much later than it is usually sold.