Tax year 2026 · United States federal
Why self-employment tax is not 15.3%
The rate is 15.3% but it applies to 92.35% of net profit, so the effective figure is 14.13% — and it falls further above the wage base. irs.gov
The 15.3% is real. It is just not a percentage of the number people apply it to.
Where 92.35% comes from
An employee and their employer each pay half of the 15.3%, and the employer’s half is a deductible business expense that never appears in the employee’s income. A self-employed person pays both halves, so the law makes an adjustment to put them in the same position: the tax is computed on 92.35% of net profit rather than all of it. irs.gov
That figure is not arbitrary. It is 100% minus 7.65% — the employer’s half of the rate — which is the share an employer would have deducted before the employee ever saw the money.
And it goes down, not up
Above the Social Security wage base the 12.4% portion stops and only the 2.9% Medicare portion continues. ssa.gov For 2026 that base is $184,500, and the effect on the effective rate is large.
| Net profit | Self-employment tax | Effective rate |
|---|---|---|
| $30,000 | $4,239 | 17.3% |
| $60,000 | $8,478 | 20.1% |
| $100,000 | $14,130 | 22.4% |
| $184,500 | $26,069 | 26.3% |
| $250,000 | $29,851 | 26.8% |
| $400,000 | $35,115 | 33.1% |
Self-employment tax as a share of profit is flat at 14.13% up to the wage base and then falls away — at $500,000 it is under 8%. It is the one federal tax that a high earner pays proportionally less of, and it is why the marginal cost of the next dollar changes sharply at one specific income.
Then half of it comes back
Half the self-employment tax is deductible above the line. irs.gov That does not reduce the self-employment tax itself — it reduces income tax.
The deduction is worth less than half the rate because it only reaches income tax, and at this income the qualified business income deduction claws back a fifth of it. irs.gov The same effect governs every above-the-line deduction.
Why the difference is worth knowing
Because most set-aside advice is built on the wrong number. A rule of thumb that starts from 15.3% and adds an income tax estimate on top is already 1.2 points too high before it begins, and rules of thumb compound their errors rather than cancelling them.
Because the wage base changes what the next dollar costs. Crossing $184,500 does not raise your rate — it lowers it, sharply, and the effect is large enough to matter for anyone deciding whether to take on more work late in the year.
Because it is not optional and not a penalty. Self-employment tax buys Social Security and Medicare coverage, and the earnings it is computed on are what your eventual benefit is calculated from. Minimising it below the wage base has a cost that arrives decades later, which is the argument that gets left out of every S-corp pitch.
Your own numbers
Each quarterly payment
$3,486
- Q1$3,486.35
- Q2$3,486.35
- Q3$3,486.35
- Q4$3,486.36
- Net profit
- $75,000
- Self-employment tax
- $10,597
- Federal income tax
- $4,898
- QBI deduction
- −$10,720
- Total for the year
- $15,495
- Effective rate on profit
- 20.7%
- What you keep
- $59,505
About $1,291 a month set aside, if that is easier to hold to than four lump sums.
State tax not included. State income tax for is not included in this figure. The federal number above is complete; your total liability will be higher by whatever charges. See which states are covered at /state-taxes/, or check your state's revenue department for its current rate. What this site covers, state by state.
Where this stops being arithmetic
If you have W-2 wages as well as 1099 income, the wage base is shared between them and the ordering matters. That case has its own page, because the intuitive answer is wrong often enough to be worth the detail.