What the 15.3% self-employment tax is, how it is calculated on Schedule SE, and legal strategies to reduce what you owe.
Last updated: April 2026 · Data: IRS, BLS, state sources
Self-employment (SE) tax is the Social Security and Medicare tax that self-employed individuals pay directly. When you are an employee, your employer pays half of these taxes (7.65%) and withholds the other half from your paycheck. When you work for yourself, you pay both halves, totaling 15.3%.
The breakdown: 12.4% goes to Social Security (on net earnings up to $176,100 in 2026) and 2.9% goes to Medicare (on all net earnings with no cap). High earners also pay an Additional Medicare Tax of 0.9% on net self-employment income above $200,000 (single) or $250,000 (married filing jointly).
SE tax applies to anyone with net self-employment income of $400 or more in a year, including freelancers, contractors, sole proprietors, LLC members, and partners in a partnership.
SE tax is calculated on 92.35% of your net self-employment income, not 100%. This reduction accounts for the deductibility of the employer-equivalent portion of SE tax.
Step-by-step calculation for a freelancer with $80,000 net SE income:
This calculation is done on Schedule SE and attached to your Form 1040. The $5,652 above-the-line deduction reduces your taxable income, which in turn reduces your regular income tax (but not the SE tax itself).
You can deduct half of your SE tax as an above-the-line deduction on Schedule 1 of Form 1040. This deduction reduces your adjusted gross income (AGI) even if you take the standard deduction. In the example above, the $5,652 deduction at a 22% income tax rate saves approximately $1,243 in income tax.
This deduction is separate from and in addition to all your business expense deductions. It does not reduce the SE tax itself, but it lowers your income tax bill.
1. Maximize business deductions. Every legitimate business expense reduces your net SE income and therefore your SE tax base. Common deductions: home office, business vehicle use, health insurance premiums, retirement plan contributions, professional subscriptions, software, and equipment.
2. Contribute to a retirement plan. A SEP-IRA allows contributions up to 25% of net SE income (up to $69,000 in 2026). A Solo 401(k) allows even higher total contributions. These contributions reduce both your income tax and your SE tax base directly.
3. Elect S-corporation taxation. If your LLC has consistent net profit of $40,000 or more per year, electing S-corp tax treatment can reduce SE tax significantly. You pay yourself a reasonable salary (subject to payroll taxes), then take additional profits as distributions not subject to SE tax. Consult a CPA before making this election.
4. Deduct health insurance premiums. Self-employed individuals can deduct 100% of health insurance premiums paid for themselves, spouses, and dependents as an above-the-line deduction. This reduces AGI but does not directly reduce SE tax.
| Characteristic | Self-Employment Tax | Income Tax |
|---|---|---|
| Purpose | Funds Social Security and Medicare | Funds general federal operations |
| Rate | 15.3% (flat) | 10% to 37% (progressive brackets) |
| Base | 92.35% of net SE income | Taxable income after all deductions |
| Cap | Social Security portion capped at $176,100 | No income cap |
| Form | Schedule SE | Form 1040 + brackets |
Use our quarterly tax calculator to estimate your combined SE tax and income tax for each quarter of 2026 based on your projected income.
Open Quarterly Tax CalculatorThe SE tax rate is 15.3%: 12.4% for Social Security (on earnings up to $176,100) and 2.9% for Medicare (no cap). An additional 0.9% Medicare surtax applies on net SE income above $200,000 (single) or $250,000 (married filing jointly).
Not by itself. A single-member LLC is taxed as a sole proprietorship by default, so SE tax still applies. Electing S-corp taxation for your LLC can reduce SE tax, but there are additional costs and compliance requirements. Consult a CPA to evaluate whether the tax savings justify the costs.
Half of your SE tax is deductible as an above-the-line deduction on Schedule 1 of Form 1040. This reduces your AGI and your regular income tax liability. However, it does not reduce the SE tax itself -- only business deductions and retirement contributions that lower your net SE income accomplish that.