Self-employment tax in 2026: how the 15.3% really works

Self-employment tax is the Social Security and Medicare tax for people who work for themselves. An employee pays 7.65% and their employer pays another 7.65%. When you're self-employed, you're both, so you pay 15.3%: 12.4% for Social Security and 2.9% for Medicare.

The 92.35% rule

You don't pay 15.3% on your whole profit. You pay it on 92.35% of your net earnings from self-employment.

The 92.35% exists to put you on the same footing as an employee, whose employer's 7.65% share is never counted as the employee's pay. Taking 7.65% off your profit (100% minus 7.65% is 92.35%) does the same for you. The result is an effective rate of about 14.13% of profit.

Example: $50,000 of profit

Step	Amount
Net profit (Schedule C line 31)	$50,000
× 92.35%	$46,175
× 15.3% = self-employment tax	$7,065
Half of it, deducted from income	$3,532

You owe self-employment tax once your net earnings from self-employment reach $400. It applies even when you owe no income tax at all.

The Social Security cap

The 12.4% Social Security part stops at the wage base, which is $184,500 for 2026 (it rises to $192,300 for 2027). The 2.9% Medicare part has no cap.

If you also have a W-2 job, your wages use up the wage base first. Someone with $150,000 of wages and $60,000 of business profit has only $34,500 of room left, so their self-employment tax is about $5,885 instead of $8,478.

The Additional Medicare Tax

Above $200,000 of combined wages and self-employment earnings ($250,000 married filing jointly, $125,000 married filing separately), an extra 0.9% Medicare tax applies to the amount over the threshold.

Half of it comes back as a deduction

You deduct half of your self-employment tax when working out your adjusted gross income. It doesn't reduce the self-employment tax itself, but it lowers your income tax. In the example above, $3,532 comes off before the brackets apply.

How it fits into your quarterly payments

Self-employment tax is part of the total you pay through quarterly estimates. For many freelancers it's actually the bigger half of the bill: a single filer with $60,000 of profit owes about $8,480 in self-employment tax and $3,560 in income tax.

The free calculator shows both parts for your own numbers.

What about an S corporation?

Some business owners elect S corporation status so that part of their income is paid as a distribution, which isn't subject to these taxes. It brings payroll, a separate tax return and the need to pay yourself a reasonable salary, so it usually only pays off at higher profits. It's a decision to make with a tax professional. The Paid & Filed workbook is built for sole proprietors and single-member LLCs that file Schedule C.