A designer at a studio desk with one hand on a small calculator and the other on a laptop, color swatches and sketches pinned to the wall behind him, afternoon window light.
The first-year surprise: income tax was expected, the extra 15.3% was not. It is the part of the bill that starts at the first dollar of profit.

What self-employment tax is

On a paycheck, Social Security and Medicare are split: 7.65% comes out of your pay and your employer pays another 7.65% you never see. Work for yourself and you are both, so you pay the full 15.3%. It is not a penalty for being self-employed; it is the same contribution, all of it visible.

How it is worked out

  1. Net earnings are 92.35% of profit. The 7.65% knocked off stands in for the employer half an employee never pays tax on.
  2. Social Security is 12.4% of those net earnings, up to $184,500 in 2026, less any W-2 wages you also earned, because both draw on the same base.
  3. Medicare is 2.9% of all of it, with no cap.
  4. Additional Medicare Tax is 0.9% on earnings over $200,000 single, $250,000 joint or $125,000 married filing separately. It is figured on Form 8959, not Schedule SE.
  5. Half of the self-employment tax is deductible on your Form 1040, which lowers income tax (not self-employment tax itself).

On the example, $85,000 of profit: $78,498 of net earnings, $12,010 of self-employment tax, and $6,005 of it deductible. That is before a dollar of income tax.

Lowering it, legitimately

The tax is charged on profit, so the first lever is every business expense you are entitled to and can prove: mileage, equipment, software, a home office, health insurance premiums (which lower income tax, though not this tax). Retirement contributions lower income tax but not self-employment tax. At steady profits well above $60,000 or so, an S-corporation election can cut it meaningfully, because only the salary you pay yourself carries the 15.3%.

Questions, answered

How is self-employment tax calculated in 2026?

Multiply your net profit by 92.35% to get net earnings from self-employment. Social Security tax is 12.4% of that, up to the 2026 wage base of $184,500 less any W-2 wages. Medicare tax is 2.9% of all of it. Above $200,000 ($250,000 married filing jointly), an Additional Medicare Tax of 0.9% applies on top.

What is the self-employment tax rate for 2026?

15.3% on 92.35% of net profit, which works out to about 14.13% of the profit itself, until net earnings pass the $184,500 Social Security wage base. Above it only the 2.9% Medicare part continues, plus 0.9% Additional Medicare Tax above $200,000 for a single filer.

Is self-employment tax on top of income tax?

Yes. Self-employment tax is the Social Security and Medicare an employer and employee would normally split, and you pay both halves. Income tax is separate. Half of the self-employment tax is deductible when working out income tax, which takes a little of the sting out.

Do I pay self-employment tax if I made less than $400?

No. If your net earnings from self-employment are under $400 for the year, no self-employment tax is due. Income tax can still apply to the profit.

How do I lower my self-employment tax?

Every legitimate business expense lowers the profit it is charged on, so complete records are the first lever. Contributions to a SEP-IRA or solo 401(k) reduce income tax but not self-employment tax. At higher, steady profits, electing S-corporation status and paying yourself a reasonable salary can reduce it, at the cost of payroll and an extra return.

Sources

  1. Self-employment tax (Social Security and Medicare taxes) — IRS. The 15.3% rate, the 92.35% rule and the $400 threshold.
  2. Contribution and benefit base — Social Security Administration. The $184,500 wage base for 2026.
  3. Schedule SE (Form 1040) — IRS. The form the calculation follows.
  4. Form 8959, Additional Medicare Tax — IRS. The 0.9% and its thresholds.