How Self-Employment Tax Works
When you work for yourself, you pay both the employer and employee portions of Social Security and Medicare taxes, known collectively as self-employment (SE) tax. This totals 15.3% on 92.35% of your net self-employment earnings. The 92.35% factor accounts for the employer-equivalent portion of SE tax, and you can deduct half of your SE tax when calculating your adjusted gross income.
SE Tax Calculation Steps
First, subtract business expenses from gross income to get net earnings. Multiply by 92.35% to get the SE tax base. Apply 12.4% Social Security tax (capped at $176,100 in 2025), 2.9% Medicare tax on all earnings, plus an additional 0.9% Medicare surtax on earnings above $200,000. The resulting SE tax is then used alongside federal income tax brackets to determine your total liability.
Frequently Asked Questions
Why do I pay 15.3% instead of 7.65% like W-2 employees?â–¾
W-2 employees pay 7.65% in FICA taxes, but their employers match that amount. As a self-employed individual, you are both the employer and the employee, so you pay the full 15.3%. However, you can deduct the employer-equivalent portion (half) on your income tax return.
When are quarterly estimated tax payments due?â–¾
Quarterly estimated payments are due April 15, June 15, September 15, and January 15 of the following year. If you do not pay enough throughout the year, you may owe an underpayment penalty when you file your annual return.
What counts as a deductible business expense?â–¾
Common deductible expenses include home office costs, equipment, software subscriptions, vehicle mileage for business travel, professional development, advertising, and health insurance premiums (for self-employed individuals). Expenses must be ordinary and necessary for your trade or business.
What is the 92.35% factor?â–¾
The 92.35% factor (100% minus 7.65%) reduces your net earnings before applying the SE tax rate. This mirrors how employers only pay FICA on the employee's wages, not on the employer's share of FICA. It effectively gives you a small deduction built into the SE tax calculation.
Calclypso Editorial Team
Reviewed by certified financial professionals. Last updated: April 2026. Tax rates reflect 2025 IRS figures. This calculator provides estimates only and should not be used as tax advice.