Question 1

What is self-employment tax?

Accepted Answer

Self-employment (SE) tax is the Social Security and Medicare tax paid by people who work for themselves. When you're an employee, your employer pays half of these taxes and you pay the other half through payroll withholding. When you're self-employed, you pay both halves — a total rate of 15.3% (12.4% for Social Security + 2.9% for Medicare). SE tax is reported on Schedule SE of your federal tax return.

Question 2

Why is SE tax calculated on 92.35% of net income?

Accepted Answer

The IRS allows self-employed individuals to calculate SE tax on 92.35% (not 100%) of their net self-employment income. This is equivalent to the employer's share of FICA taxes that W-2 employees receive as a deduction. It effectively reduces your SE tax base by 7.65%, mimicking what employers deduct before calculating their employees' tax liability.

Question 3

What is the Social Security wage base for 2024?

Accepted Answer

For 2024, the Social Security wage base is $168,600. This means only the first $168,600 of your net self-employment earnings (after the 92.35% adjustment) is subject to the 12.4% Social Security tax. Any earnings above this threshold are still subject to the 2.9% Medicare tax (and potentially the additional 0.9% Medicare surtax), but not Social Security tax.

Question 4

What is the additional Medicare tax for high earners?

Accepted Answer

If your self-employment earnings exceed $200,000 (single filers) or $250,000 (married filing jointly), you owe an additional 0.9% Medicare surtax on the amount above the threshold. This is on top of the regular 2.9% Medicare tax. For example, if you earn $250,000 as a single filer, you'd owe the extra 0.9% on $50,000, adding $450 to your tax bill.

Question 5

Can I deduct half of my SE tax?

Accepted Answer

Yes. You can deduct the employer-equivalent portion of your SE tax (half of the total SE tax) when calculating your adjusted gross income (AGI). This deduction is taken on Schedule 1 of Form 1040 — it's an 'above the line' deduction, meaning you get it whether you itemize or take the standard deduction. This calculator shows this deductible amount in the breakdown.

Question 6

Who has to pay self-employment tax?

Accepted Answer

You must pay SE tax if your net self-employment earnings are $400 or more per year. This includes freelancers, independent contractors (1099 workers), sole proprietors, gig workers (Uber, DoorDash, etc.), and members of a partnership. If you receive a 1099-NEC or 1099-K, you likely owe SE tax on that income.

Question 7

Is self-employment tax the same as income tax?

Accepted Answer

No. Self-employment tax and income tax are separate. SE tax covers Social Security and Medicare only. You also owe federal (and possibly state) income tax on your net self-employment income. Your total tax burden is SE tax + income tax. This calculator focuses on the SE tax portion. Use our Tax Calculator to estimate your income tax separately.

Self-Employment Tax Calculator

SE Tax Estimate (2024)

How It Works

Enter Net SE Income

Select Filing Status

See Your SE Tax

Frequently Asked Questions

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