Guides / Self-Employment Tax

By NorseHorse. Updated October 16, 2026. General information, not tax advice; confirm your situation with a tax professional.

If you net $400 or more from self-employment, you owe self-employment tax: 15.3 percent on 92.35 percent of your net profit, on top of regular income tax. It's the Social Security and Medicare tax an employer would split with you, except you pay both halves. For 2026 the Social Security part stops at $184,500 of combined wages and self-employment earnings.

Who owes it

You owe it if your net earnings from self-employment are $400 or more. That's net, after business expenses, not the total the apps paid you. Booth-rent stylists and barbers, rideshare and delivery drivers, and bartenders or servers who work events as contractors usually report that income on Schedule C, and Schedule C's net profit is where self-employment tax starts.

Tips you earn as an employee are different. Your employer uses your tip reports to figure the Social Security and Medicare tax it withholds from your pay, and those tips don't go through Schedule SE. They do count toward the Social Security wage limit, which matters if you have both kinds of income.

The rate, and why it's 15.3 percent

The self-employment tax rate is 15.3 percent: 12.4 percent for Social Security and 2.9 percent for Medicare. On a W-2 job, Social Security is 6.2 percent from you and 6.2 percent from your employer, and Medicare is 1.45 percent from each. When you work for yourself, you're both sides, so you pay the full 12.4 and 2.9.

How Schedule SE figures it

Schedule SE is the form that calculates the tax. In order:

1. Start with your net profit from Schedule C, line 31.
2. Multiply it by 92.35 percent. If the result is under $400, you stop: no self-employment tax.
3. Social Security: 12.4 percent of that amount, but only up to the year's limit minus any Social Security wages and tips from W-2 jobs. For 2026 the limit is $184,500.
4. Medicare: 2.9 percent of the full amount, with no limit.
5. Add the two. That's your self-employment tax.

Because only 92.35 percent of your profit is taxed, the effective rate on your full net profit works out to about 14.1 percent, not 15.3.

Half of it is deductible

You deduct the employer-equivalent half of your self-employment tax when you figure your adjusted gross income. On the 2025 Schedule SE, line 13 multiplies your tax by 50 percent and sends it to Schedule 1. This lowers your income tax. It doesn't lower the self-employment tax itself.

Additional Medicare Tax

A separate 0.9 percent Additional Medicare Tax applies to wages and self-employment income above $200,000 for single and head of household filers, $250,000 for married filing jointly and $125,000 for married filing separately. If you have both, your wages reduce the threshold first, and the tax applies to self-employment income above what's left. There's no employer match, and you figure it on Form 8959.

A worked example

You drive for delivery apps in 2026 and have no W-2 job. After mileage and other expenses, your Schedule C net profit is $40,000.

Income tax comes on top of that. The tip tax calculator runs both.

Now a second case. You earn $170,000 in W-2 wages and tips, plus $30,000 net profit from private bartending. Your self-employment earnings are $27,705 (92.35 percent of $30,000), but only $14,500 of room is left under the $184,500 wage base. Social Security tax is 12.4 percent of $14,500, or $1,798. Medicare is 2.9 percent of all $27,705, or $803. Total: $2,601. Your combined $197,705 stays under the $200,000 single threshold, so no Additional Medicare Tax.

What actually lowers it

Only a lower net profit lowers self-employment tax, so legitimate business expenses on Schedule C do the work. For drivers, mileage is usually the biggest one: the 2026 standard rate is 72.5 cents a mile for January 1 through June 30 and 76 cents from July 1. The mileage calculator handles the split.

The new tips deduction does not help here. It's claimed on Schedule 1-A, not Schedule C, so your tips still carry the full self-employment tax. See No Tax on Tips for self-employed workers.

Paying during the year doesn't reduce the tax, but it keeps you clear of the underpayment penalty. The quarterly tax guide has the 2026 dates.

Common questions

Do I owe self-employment tax on my W-2 tips?

No. Tips you report to an employer are wages. Your employer withholds your share of Social Security and Medicare from your pay and pays its own share. Tips you didn't report to your employer go on Form 4137 instead.

What if I lost money?

If your net earnings come out under $400, Schedule SE tells you to stop: you don't owe self-employment tax for that year.

Is self-employment tax the same as quarterly tax?

No. Self-employment tax is one of the taxes you owe. Quarterly estimated payments are how you pay it, along with income tax, during the year.

Does the Social Security wage base change for 2027?

Yes. The Social Security Administration has set it at $192,300 for 2027 earnings.

Track it all with Cashout. Shifts, tips, unpaid breaks, taxes, and mileage, logged in seconds. iPhone · Android