How Self-Employment Tax Works
Self-employed individuals (freelancers, sole proprietors, independent contractors, and single-member LLC owners) pay both the employee and employer portions of FICA taxes:
- Social Security: 12.4% on net earnings up to the annual limit ($176,100 for 2026).
- Medicare: 2.9% on all net earnings with no income cap, plus 0.9% Additional Medicare tax for high earners.
Under IRS rules, you only pay SE tax on 92.35% of your net business profit, and you can deduct half of your total SE tax (50%) on Form 1040 as an above-the-line deduction to lower your federal income tax.
Frequently Asked Questions
When are quarterly estimated taxes due?
Primary Legal Sources: Internal Revenue Service (IRS) Publication 15-T (Federal Income Tax Withholding Methods), IRS Form 1040 Statutory Instructions, and Social Security Administration (SSA) OASDI Wage Base limit guidelines.
Calculation Methodology: Applies projected IRS standard deductions ($15,000 for Single, $30,000 for Married Filing Jointly) followed by progressive marginal brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) and statutory FICA rates (6.2% OASDI up to the cap + 1.45% Medicare, plus 0.9% high-income surtax).
Disclaimer: This calculator is provided for financial estimation and informational purposes only. It does not constitute formal legal, accounting, or professional tax advice. For personalized tax filings or complex deduction strategies, consult a licensed Certified Public Accountant (CPA) or tax attorney.