How self-employment tax is calculated
- Net earnings: multiply your net profit by 92.35%.
- Social Security: 12.4% of net earnings, up to the 2026 wage base of $184,500 (reduced by any W-2 wages).
- Medicare: 2.9% of all net earnings, plus 0.9% on earnings over $200,000 ($250,000 married filing jointly).
- Deduction: half of the Social Security and Medicare amounts comes off your adjusted gross income.
- Income tax: the standard deduction is subtracted and the rest is taxed through the 2026 brackets.
The formulas, and what every variable means
net earnings = net profit × 92.35%
SE tax = 12.4% × min(net earnings, wage base − W-2 wages) + 2.9% × net earnings
adjusted gross income = profit + W-2 wages + other income − ½ × SE tax
income tax = brackets applied to (adjusted gross income − standard deduction)
| Term | Meaning |
|---|---|
| Net profit | Business income minus deductible business expenses (Schedule C). Tax is charged on profit, not revenue. |
| 92.35% | An employee's employer pays half of FICA and deducts it as a business expense. This factor gives the self-employed the equivalent adjustment. |
| Wage base | $184,500 in 2026. Earnings above it are not subject to the 12.4% Social Security part. |
| W-2 wages | Pay from a job. They count toward the wage base first, so they can shrink the Social Security part of self-employment tax. |
| Half of SE tax | The deduction that lowers adjusted gross income (and so income tax), though not the SE tax itself. |
| Standard deduction | $16,100 single, $32,200 married filing jointly, $24,150 head of household. |
Worked example 1, by hand: a freelancer with $80,000 profit
Single filer, no other income, no state income tax.
- Net earnings: $80,000 × 0.9235 = $73,880.
- Social Security: $73,880 × 12.4% = $9,161.12.
- Medicare: $73,880 × 2.9% = $2,142.52.
- Self-employment tax: $9,161.12 + $2,142.52 = $11,303.64.
- Deductible half: $5,651.82, so adjusted gross income is $80,000 − $5,651.82 = $74,348.18.
- Taxable income: $74,348.18 − $16,100 = $58,248.18, and federal income tax on it is $7,526.60.
- Total: $11,303.64 + $7,526.60 = $18,830.24, which is 23.5% of profit.
Split into four estimated payments, that is about $4,708 each. For the 2026 tax year they are generally due April 15, June 15 and September 15 of 2026, and January 15 of 2027.
Worked example 2: a $12,000 side business on top of a $60,000 job
Single filer with $60,000 of W-2 wages and $12,000 of net profit from weekend work. The job's payroll taxes are already handled, so only the side income creates new tax.
| Item | Amount |
|---|---|
| Self-employment tax on the side profit | $1,695.55 |
| Extra federal income tax caused by the side profit | $1,803.49 |
| Total extra tax | $3,499.04 |
| Share of the side profit kept | 71% |
After the standard deduction, the $60,000 job leaves $43,900 of taxable income, in the 12% bracket. The side profit pushes part of it into the 22% bracket, and the self-employment tax (15.3% of 92.35% of the profit) comes on top. Together about 29% of each side dollar goes to tax, so setting aside that share of side income is a sensible starting point for this profile.
Worked example 3: $250,000 of profit and the Social Security cap
Higher earners reach the wage base, and the Social Security part of the tax stops growing. Single filer, no other income, no state tax.
| Item | Amount |
|---|---|
| Net earnings ($250,000 × 0.9235) | $230,875 |
| Social Security (capped at $184,500 × 12.4%) | $22,878 |
| Medicare (2.9% of net earnings) | $6,695 |
| Additional Medicare Tax (0.9% above $200,000) | $278 |
| Self-employment tax | $29,851 |
| Federal income tax | $46,572 |
| Total tax | $76,424 |
Self-employment tax works out to 11.9% of profit here, compared with 14.1% in example 1, because the Social Security part is capped at $22,878 while profit keeps rising. Total tax is 31% of profit, or about $19,106 per quarter.
Planning tip: divide your estimated total by four and move that amount into a separate savings account each quarter. Paying on time is what avoids penalties.
Common mistakes to avoid
- Setting aside only an income-tax percentage. Self-employment tax is a second, separate bill.
- Treating revenue as profit. Tax is on profit after expenses, so track every legitimate cost.
- Forgetting state tax. The calculator includes a state rate field, so use it.
- Skipping quarterly payments. Underpayment penalties add up, and a large bill in April is a cash-flow shock.
- Mixing personal and business money. A separate account makes it easy to see profit and to save tax money.
Ways to lower what you owe
- Track every legitimate business expense, since they reduce net profit before any tax is applied.
- Contribute to a retirement account such as a Solo 401(k) or SEP IRA, which lowers taxable income.
- Ask a tax professional about the QBI deduction, the self-employed health insurance deduction and the home-office deduction.
For a deeper explanation read our guide to self-employment tax, or compare with employee pay in the paycheck calculator.
Sources and review
Rates and the wage base follow the IRS instructions for Schedule SE and the Social Security Administration's 2026 wage base. Brackets and standard deductions come from IRS Revenue Procedure 2025-32. For payment rules see IRS Publication 505. Last reviewed September 2026. See our methodology. This is an estimate and not tax advice.