What Is Self-Employment Tax?
Self-employment tax is the combined Social Security and Medicare tax paid by independent contractors, freelancers, and small-business owners. In 2026, the total rate is 15.3%, which includes 12.4% for Social Security and 2.9% for Medicare.
How to Calculate It Step by Step
Start with net business income after deducting ordinary and necessary expenses. Then apply the self-employment tax rate to roughly 92.35% of that income. This adjustment reflects the fact that self-employed taxpayers effectively pay both the employer and employee portions.
The Deduction That Helps
You can deduct half of the self-employment tax as an adjustment to income. That deduction lowers your federal taxable income, even though it does not affect your self-employment tax itself.
Estimated Payments and Cash Flow
If you expect to owe more than $1,000 in tax, you should make quarterly estimated payments to avoid penalties. Track your income and expenses closely so you can project your liability and spread payments evenly throughout the year.
Comparing to W-2 Income
When you compare freelance income to a W-2 salary, remember that employers withhold payroll taxes and may cover half of Social Security and Medicare. As a self-employed person, you should factor this additional cost into your pricing and budgeting.
Smart Planning for 2026
Use our calculators to estimate net income after self-employment tax, compare it with traditional wages, and simulate retirement contributions through a Solo 401(k) or SEP IRA. These strategies help you minimize taxes while still saving for the future.