Self-employment tax is the Social Security and Medicare tax that freelancers, independent contractors and sole proprietors pay. Unlike employees who split FICA with their employer, self-employed individuals pay both halves — a combined rate of 15.3%.
The breakdown is 12.4% for Social Security (on earnings up to $176,100 in 2025) and 2.9% for Medicare (on all earnings, with an additional 0.9% on earnings above $200,000 for single filers).
However, you do not pay SE tax on your full net profit. The IRS allows you to calculate SE tax on 92.35% of your net earnings, which accounts for the employer-equivalent portion of FICA.
For example, on $100,000 net self-employment profit: your SE taxable base is $92,350. Social Security tax is $11,451 (12.4% of $92,350). Medicare tax is $2,678 (2.9% of $92,350). Total SE tax is $14,129.
You also get to deduct half of your SE tax from your adjusted gross income, which reduces your income tax. In this example, your AGI deduction would be $7,065.
Strategies to reduce SE tax include forming an S-Corp (pay yourself a reasonable salary and take the rest as distributions, which are not subject to SE tax), maximizing business deductions to lower net profit, contributing to a SEP-IRA or Solo 401(k) which reduces taxable income, and timing income and expenses between tax years.
The quarterly estimated tax payment deadlines are April 15, June 15, September 15 and January 15. Missing these deadlines results in penalties.
Use our self-employment tax calculator to see your exact SE tax and federal income tax combined.