← Guides · November 10, 2026
Self-Employment Tax Explained: What 15.3% Really Covers
Employees see Social Security and Medicare withheld from each paycheck, and the employer pays a matching share. When you work for yourself, you pay both halves. That combined amount is the self-employment tax, and it is separate from federal income tax.
How it is calculated
The rate is 12.4% for Social Security plus 2.9% for Medicare, which adds up to 15.3%. It applies to a portion of your net self-employment earnings (profit after business expenses), not to your gross revenue. The IRS applies the tax to roughly 92.35% of net profit, which is meant to mirror the fact that employers can deduct their half of payroll tax.
The Social Security part only applies up to an annual wage base that the Social Security Administration updates each year. Medicare has no such cap, and higher earners can owe an additional Medicare surtax. Check the current figures on irs.gov before you plan.
Why it surprises people
Self-employment tax is owed even if your income tax bill is small. A freelancer with modest profit can owe a meaningful self-employment tax and still fall in a low income tax bracket. It is also due on every dollar of net profit from the first one, which is why quarterly estimates need to include it.
A deduction that softens the blow
You can generally deduct half of your self-employment tax when you compute adjusted gross income. That lowers your income tax, though not the self-employment tax itself.
What to do with this
Track expenses carefully, because every legitimate deduction reduces net profit and therefore both taxes. Then set money aside for the combined total, not just income tax. The calculator on the home page combines both so you can see a single “set aside” figure. This is general information, not tax advice; a tax professional can check your specific situation.