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How Self-Employment Tax Works in 2025 and 2026
Self-employed individuals — freelancers, sole proprietors, independent contractors, and single-member LLC owners — owe self-employment (SE) tax on top of regular income tax. SE tax covers both the employee and employer shares of Social Security and Medicare, totaling 15.3% on net self-employment earnings up to $168,600 (the Social Security wage base), plus 2.9% Medicare-only on earnings above that.
The key relief: you can deduct half of your SE tax from adjusted gross income before calculating income taxes. On $80,000 net self-employment income, SE tax is roughly $11,304. You deduct $5,652 from AGI, reducing your income tax by about $1,243 if you're in the 22% bracket — an effective combined burden that's more manageable than the headline 15.3% suggests.
2025–2026 Quarterly Estimated Tax Payments for Self-Employed
Unlike W-2 employees with automatic withholding, self-employed individuals must pay taxes quarterly — due in April, June, September, and January. Missing or underpaying these can trigger IRS penalties at the current 8% annual rate. A practical rule: set aside 25–30% of each payment received if you earn $50,000–$150,000 net and live in a taxed state. Check the Self-Employed box above for your estimate. See our tax withholding calculator to compare with W-2 scenarios, and the main US income tax calculator for a full combined view.
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Self-Employment Tax FAQs — 2025 & 2026
How much self-employment tax do I owe in 2024?
SE tax is 15.3% applied to 92.35% of your net self-employment income (the 92.35% factor represents the deductible employer share). On $80,000 net income: $80,000 × 0.9235 = $73,880 × 15.3% = $11,304 SE tax. Above $168,600 in net earnings, you still owe 2.9% Medicare (and an additional 0.9% above $200,000 for single filers). You then deduct half of that SE tax ($5,652) from gross income before income tax applies. Use the calculator above with the Self-Employed box checked for your precise estimate.
Can I deduct business expenses before calculating self-employment tax?
Yes — SE tax is calculated on your net self-employment income after legitimate business expenses. If you earned $100,000 in freelance revenue but spent $20,000 on equipment, software, and home office expenses, your net SE income is $80,000 and SE tax applies to that lower figure. Proper expense tracking reduces both SE tax and income tax simultaneously. Enter your net profit — revenue minus expenses — in the income field above for an accurate estimate. For the income tax side, see our federal tax brackets guide.
When are 2024 quarterly estimated tax payments due?
For 2024 income: Q1 payment due April 15, 2024 (covers January–March); Q2 due June 17, 2024 (April–May); Q3 due September 16, 2024 (June–August); Q4 due January 15, 2025 (September–December). Each installment should cover roughly 25% of your expected annual tax. IRS safe harbor: pay at least 100% of your prior year’s total tax liability (110% if last year’s AGI exceeded $150,000) and you avoid underpayment penalties even if you owe more at filing.
Should I form an S-corp to reduce self-employment tax?
S-corp owners who work in the business must pay themselves a "reasonable salary" subject to normal payroll taxes. However, additional profit distributions are not subject to SE tax — only income tax. This strategy can reduce SE tax for profitable businesses, but the administrative cost (payroll service, extra tax filings, state fees) typically outweighs the savings unless net profit exceeds roughly $60,000–$80,000 annually. The IRS scrutinizes unreasonably low salaries. Visit our state income tax rates guide to understand how your state treats S-corp distributions.
Last updated: January 2024
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