Last checked 2026-11-07. Self-employment tax rates and reporting thresholds change — always confirm the current rules on the official pages linked below.
If a job offer, a side project, or a client ever arrives as "we will pay you as a contractor," this page is about you — the moment you are paid on a 1099 instead of a W-2, this tax starts.
See what the tax leaves you with by entering your net profit into the calculator on this page — the 15.3% is only one of the numbers that matters.
Social Security and Medicare are financed by payroll taxes split between employee and employer. The employee pays 6.2% for Social Security and 1.45% for Medicare, and the employer pays the same amounts — 12.4% and 2.9% in total (IRS Topic 751).
When you are self-employed there is no employer to pay the second half, so the law collects both halves from you. That is the whole origin of the 15.3%: 12.4% plus 2.9%. It is not a penalty rate and it is not a surtax on business owners. It is the same combined payroll tax that would have been paid on your wages, charged to one person instead of two.
This also explains why the number feels larger than the FICA line on a paycheck. An employee sees 7.65% withheld; a self-employed person sees 15.3% assessed. The difference is the half that an employer would otherwise have paid.
The tax is applied to net earnings from self-employment, and the amount subject to it is generally 92.35% of those net earnings (IRS Topic 554).
The adjustment is easy to remember once you see the arithmetic: 92.35% is 100% minus 7.65%. The rate stays at 15.3%; the base is what changes.
Two limits sit on top of that base:
So the effective rate on a very large profit is lower than 15.3%, because the 12.4% Social Security portion stops at the ceiling while the 2.9% Medicare portion continues.
You may deduct the employer-equivalent portion of the self-employment tax when you figure adjusted gross income — in practice, one-half of the tax (IRS).
The important word is income tax. The IRS is direct about the limit: this deduction only affects your income tax, and it does not affect either your net earnings from self-employment or your self-employment tax (IRS Topic 554).
In plain terms: the deduction gives you a smaller income tax bill. It does not refund the self-employment tax, reduce the 15.3%, or change the 92.35% base. It is a deduction against income, not a credit against the tax.
Take a sole proprietor with $10,000 of net earnings from self-employment.
The $1,412.96 is still owed as self-employment tax. The $706.48 deduction reduces the income on which ordinary income tax is computed, and the value of that reduction depends on your marginal income tax rate. At a higher rate, the same deduction is worth more; at a lower rate, less.
This example stays below the Social Security ceiling, so the full 15.3% applies. Above the ceiling, the arithmetic changes because only the Medicare portion continues.
The paperwork follows the relationship, not the other way around. If you are an independent contractor, you are self-employed, and your earnings are subject to self-employment tax. Those earnings are generally reported to you on Form 1099-NEC, box 1 (IRS).
If you are an employee, your earnings are generally not subject to self-employment tax. They are reported on Form W-2, and they are subject to FICA and income tax withholding instead (IRS).
The distinction is not a matter of what the parties call it. The IRS looks at the facts of each case and at who has the right to control how the work is done — not just what result is produced (IRS). A worker who is told what to do and how to do it can be an employee even if the arrangement is labeled a contracting job.
For tax years beginning after 2025, a payer must report nonemployee compensation of $2,000 or more on Form 1099-NEC (IRS instructions). The form must be furnished to the payee and filed with the IRS by January 31 (IRS instructions).
That $2,000 figure is a reporting threshold: it is the point at which the payer's obligation to issue the form begins. Our suggestion is not to treat it as the point at which the income becomes taxable. Keep your own record of every payment, because the absence of a form does not change what you earned, and the self-employment tax is computed from your net earnings, not from the forms you received.
This page explains the self-employment tax itself. It does not cover how net earnings are calculated from business income and expenses, the income tax that applies on top of the self-employment tax, state taxes, or the estimated tax payments that many self-employed people make during the year. Each of those changes the final amount you keep, and each has its own rules.
The 15.3% is the part people remember. The 92.35% base and the half deduction are the parts that decide what the rate actually costs you. Enter your own net profit in the calculator on this page to see both at once.
Updated 2026-11-08 · Sources retrieved 2026-11-07
This is a general explanation of how self-employment tax works, not tax advice. The example uses round net earnings, ignores income tax, state tax and estimated payments, and assumes the Social Security ceiling is not reached. Your own result depends on your full return. For anything you will act on, check the IRS pages linked above or ask a tax professional.
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