Self-Employment Tax
Also known as: SE tax · FICA for self-employed · self-employed Social Security
Definition
Self-employment tax is the Social Security and Medicare tax paid by self-employed individuals in the US. It's 15.3% of your net earnings — covering both the employee and employer portions that a traditional employer would normally split with you.
Detailed Explanation
The 15.3% self-employment tax breaks down into: 12.4% for Social Security (on the first $168,600 of net earnings in 2026) and 2.9% for Medicare (on all net earnings, no cap). An additional 0.9% Medicare surtax applies to earnings over $200,000 (single) or $250,000 (married). This is IN ADDITION to your regular income tax. A freelancer earning $80,000 in net profit pays approximately $12,240 in self-employment tax plus federal and state income tax. Key deductions that reduce self-employment tax: half of the self-employment tax itself is deductible as an adjustment to income, retirement contributions (SEP IRA, Solo 401k) reduce taxable income, and health insurance premiums for the self-employed are also deductible. Freelancers should set aside 25-30% of every payment for taxes and make quarterly estimated payments to avoid penalties.
Freelancer Example
A freelance consultant with $90,000 in net profit pays 15.3% self-employment tax = $13,770. They can deduct half ($6,885) as an adjustment to income. They make quarterly estimated payments of approximately $5,000 each to cover both income tax and self-employment tax.