Key takeaways
Self-employment tax is the self-employed version of the Social Security and Medicare taxes that normally come out of a W-2 paycheck (FICA). It's charged under a separate law, the Self-Employment Contributions Act, which is why you'll see it called SECA tax on IRS forms.
Unlike employees who have these taxes withheld by their employers, self-employed individuals must pay both the employer and employee portions, totaling 15.3%.
This tax applies to all earned income, and even those with side gigs must pay it.
While the tax rate is high, self-employed individuals can deduct half of their self-employment tax and various business expenses to lower their taxable income.
What is self-employment tax?
Self-employment tax is made up of two taxes: Social Security and Medicare. They're the same two taxes that W-2 employees pay through FICA (the Federal Insurance Contributions Act). The self-employed version is charged under a different law, the Self-Employment Contributions Act, so the IRS calls it SECA tax or just self-employment tax.
Technically, all working Americans pay FICA. And I'm not generalizing when I say that! All earned income is subject to it, and the IRS rigidly enforces it. It’s the golden child of the tax code: untouchable by all and a real pain in the butt.
To date, there are only a few exceptions to the requirement to pay this tax. (One of these is church employees who take a literal vow of poverty.) So yes, we all pay it.
The best way to understand self-employment tax is to see how it works on the employee level first. Then, I’ll explain how things are different for self-employed people.
How FICA taxes work for employees
FICA taxes are collected through two channels: the employee and the employer. Here’s how it works on both ends.
The employees’ share of FICA taxes
Throughout the year, FICA is automatically deducted from a W-2 employee’s gross pay and remitted to the IRS in a process called withholding.
Many employees don’t even realize they’re paying FICA taxes! When they receive their W-2s however, the amounts paid in are reported in boxes 4 and 6.
Social Security tax is 6.2%, and it’s assessed on the first $184,500 of earned income in 2026 (the cap was $176,100 for 2025 and rises most years). We’ll come back to the term "earned income", but for now just know that it includes your W-2 wages.
Earned income above the cap is exempt from Social Security tax.
Medicare tax is 1.45%, and it’s assessed on all earned income, with no current threshold limits. The combined rate is 7.65%.
High earners pay an extra 0.9% Additional Medicare Tax on earned income above $200,000 for single filers or $250,000 for joint filers. Employers don't match that piece, and the thresholds aren't adjusted for inflation.
The employer’s share of FICA taxes
The employer is required to “match” the FICA taxes paid by their employees. This effectively means they’re paying the same rate, so when an employee hits the maximum taxable threshold for Social Security, the employer also becomes exempt.
The employer portion of FICA is an added cost to having employees, so the IRS allows employers to write off their half of the tax. This part is also relevant for self-employed people — more on that later!
How much is self-employment tax?
Self-employed people are required to pay FICA taxes as well. When they pay it, it’s known as “self-employment tax” — SE tax for short.
All “earned income” is subject to Medicare and Social Security. Earned income is anything you receive in exchange for a product or service.
An employee’s wages count, because they're received in exchange for time and labor. Self-employed individuals cut out the middleman — the boss — and receive their earnings directly from the customers they serve or sell products to.
I mentioned before that the IRS is stingy about FICA tax, and I wasn’t joking. The IRS makes an additional 7.65% off of the middleman that freelancers did away with. So to ensure they still get their cut, the IRS requires freelance workers to pay both the employer and the employee portions of FICA.
In total, the combined self-employment rate for FICA is 15.3%: 12.4% for Social Security plus 2.9% for Medicare.
The tax is calculated on 92.35% of your net profit, not 100%, so it works out to about 14.1% of what your business actually clears. And the 12.4% Social Security piece stops once your combined wages and self-employment earnings pass the annual cap ($184,500 in 2026).
Who has to pay self-employment taxes?
All self-employed people, like freelancers, independent contractors, and small business owners are required to pay self-employment taxes once their net earnings from self-employment reach $400 for the year. (This is true whether you have a sole proprietorship or a single-member LLC.)
Below $400, you still report the income, but you don't owe SE tax on it.
The requirement to pay self-employment tax also extends to W-2 employees who work side hustles. If you drive for Uber only on the weekends or sell the occasional piece of jewelry on Etsy, you’re liable for the full 15.3% — even if FICA taxes are paid through your employer also.
Occasionally taxpayers who work multiple jobs will end up paying more Social Security tax than they’re liable for. In these instances, the IRS will refund the overpaid tax when you file your 1040 tax return.
Lowering your self-employment tax bill
A 15.3% tax rate is a difficult pill to swallow. Especially since it can’t be reduced by any of your regular above-the-line tax deductions, such as student loan interest and retirement contributions, or the standard deduction and your itemized personal deductions.
Whatever net profit is left on your Schedule C gets hit with SE tax (about 14.1% of net profit after the 92.35% adjustment), and the only thing that reduces it is lowering that net profit. Retirement contributions, the self-employed health insurance deduction, and the 20% QBI deduction all lower your income tax, but none of them touch SE tax.
You can estimate how much you’ll end up paying using our handy-dandy self-employment tax calculator. Simply plug in your net income and voila! Your projected tax bill.
Fair warning: Those numbers can be pretty steep. So if you need to step away to stress-eat some Cheetos, go right ahead.
Once the initial shock has passed, let’s consider the options you have to reduce your bill.
What tax write-offs can I claim?
The deductible part of self-employment tax
Good news: Half of your self-employment tax is a deduction in and of itself.
If you recall, employers are permitted to write-off their portion of FICA (7.65%) since it’s essentially an added cost of having employees. In the same vein, the additional 7.65% freelancers pay to be their own boss is an eligible write-off against their income taxes.
You’d forgotten about income taxes for a second, huh? Your business income is subject to both income and SE tax.
In general, this isn't great. Say you're in the bottom income tax bracket, the 10% bracket. To find out your total tax liability from both income and SE tax, you'd add that 10% to the 15.3% you're paying in SE tax — resulting in 25.3%. That's just over a fourth of your total income!
Luckily, the employer portion of your SE tax can be used to reduce your income taxes. You’ll deduct half when you fill out Schedule SE.
Business tax deductions you can take
Self-employment taxes are assessed on your net income — meaning, your income after eligible business expenses have been deducted. So the best way to lower your tax bill is to lower your net income by deducting everything you’re spending on running your business.
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Anyone self-employed can deduct business expenses: you don’t need an LLC to claim these write-offs. You’ll fill out these expenses on your Schedule C, which self-employed people use to report their income and expenses. Some common business expenses for freelancers and gig workers include:
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Paying your self-employment taxes
Hopefully you were able to come up with a reliable estimate of your tax bill using Keeper’s SE tax calculator.
Armed with this estimate, you can pay the IRS a few different ways:
IRS Direct Pay (free, straight from your bank account),
Your IRS Online Account,
A debit or credit card through an IRS-approved processor (for a fee), or
Directly in the Keeper app.
The IRS still accepts mailed checks for now, but it's phasing out paper payments under a 2025 executive order, so electronic is the safer bet. If you've been using EFTPS, note that the IRS is retiring it for individuals in late 2026.
To learn more about the process of filing, take a look at our step-by-step guide on filing self-employment taxes.
Remember, you don’t have to pay this amount all at once! Most people make quarterly estimated tax payments to spread the cost out over the year. (In fact, the IRS will penalize you for not paying quarterly if you’re on track to owe more than $1,000 in taxes!)
To learn more about this process, check out our 411 article on how to file quarterly taxes.
Sarah is an Enrolled Agent with the IRS and a former staff writer at Keeper. In 2022, she was named one of CPA Practice Advisor’s 20 Under 40 Top Influencers in the field of accounting. Her work has been featured in Business Insider, Money Under 30, Best Life, GOBankingRates, and Shopify. Sarah has spent nearly a decade in public accounting and has extensive experience offering strategic tax planning at the state and federal levels. Her clients have come from a wide range of industries, including oil and gas, manufacturing, real estate, wholesale and retail, finance, and ecommerce, and she has handled tax returns for C corps, S corps, partnerships, nonprofits, and sole proprietorships. In her spare time, she is a devoted cat mom and enjoys hiking, painting, and overwatering her houseplants.
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Scott Levy grew up in Miami, Florida, the son of a CPA and Tax Attorney. You could say taxes were in his blood. He's been a licensed CPA since 2011 with a Bachelors in Accounting, and a Master's in Applied Economics and Data Intelligence. Over the years, Scott has worked with a large variety of clients from different walks of life. From bartenders to CEOs, Scott has helped them all maximize their tax savings and plan for their futures.
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Keeper’s tax guides are built on primary sources: the tax code, IRS forms, instructions and publications, and state tax agency guidance. We link to external sources where appropriate and check figures against the tax year they apply to. This article was peer reviewed by a licensed tax professional (CPA or EA).
This article is for informational purposes only and isn’t tax, legal, or financial advice. Tax rules change and depend on your situation, so talk to a tax professional about yours.
