Self-employment tax is 15.3%, and it is not charged on your revenue, your gross receipts, or even your full net profit. It is charged on 92.35% of your net profit, one part of it stops at a ceiling, and half of the total comes back to you as a deduction on the front of your return.
Miss any of those three adjustments and your estimate is wrong in both directions at once: too high on the rate, too low on what you actually keep.
Tax Disclaimer: This article provides educational information based on IRC § 1401–1402 and published IRS figures for tax year 2026, and is not tax advice. Consult a certified CPA or tax professional for individual advice.
Where that first multiplication comes from
An employee and their employer split the payroll-tax bill in half. The employer’s half is a business expense, so it is never part of the employee’s taxable wage.
A self-employed person is both parties. Charging the full 15.3% on the whole profit would tax you on money an employer would have deducted before your wage was ever calculated, so the law hands back the equivalent: you multiply net profit by 92.35% first, and that result, called net earnings from self-employment, is what the rate applies to.
The factor is not arbitrary. It is what is left after removing the employer-equivalent share of the tax from the base, and it is the reason the effective bite is closer to 14.1 percent of profit than to 15.3.
You owe the tax at all once net earnings reach $400 for the year. That threshold has not moved in decades and it is low enough that most side income clears it.
The rate is two rates with different ceilings
The 15.3% is a sum, and the halves behave differently.
The Social Security portion is 12.4% and it applies only up to the wage base, which for 2026 is $184,500. Above that, it stops entirely. Any W-2 wages you earned in the same year count against that ceiling first, which matters enormously to anyone who was employed for part of the year and freelance for the rest.
The Medicare portion is 2.9% and it has no ceiling at all. It applies to every dollar of net earnings.
On top of that, an Additional Medicare Tax of 0.9% applies above $200,000 for single filers and $250,000 for married filing jointly. It is not part of the 15.3% and it is not halved or deducted.
The half you get back
50% of your self-employment tax is deductible in arriving at adjusted gross income. Not an itemized deduction, not conditional on anything. You take it whether or not you itemize.
This is the adjustment people leave out, and leaving it out is expensive in a specific way: it inflates the AGI you use for everything downstream, including the thresholds that govern the QBI deduction.
The whole thing, worked
Take a freelancer with $80,000 of net profit on Schedule C, no W-2 wages, filing single.
| Step | Calculation | Result |
|---|---|---|
| Net profit | From Schedule C | $80,000 |
| Net earnings from self-employment | $80,000 × 92.35% | $73,880 |
| Social Security portion | $73,880 × 12.4% (under the wage base) | $9,161 |
| Medicare portion | $73,880 × 2.9% | $2,143 |
| Self-employment tax | Sum of the two | $11,304 |
| Deduction against AGI | 50% of $11,304 | $5,652 |
The bill is $11,304, which is 14.1% of the $80,000, not 15.3%. And $5,652 of income comes off the top before income tax is calculated at all. Income tax is separate and sits on top of this; the figures above are illustrative and depend on your own deductions and filing status.
Why this is a September problem, not an April one
Self-employment tax is not withheld by anyone. It is paid in quarterly instalments across the year, and the remaining 2026 dates are April 15, 2026; June 15, 2026; September 15, 2026; and January 15, 2027.
Someone who started freelancing this spring is often looking at their first genuine quarterly obligation right now, and the threshold that triggers it is expecting to owe $1,000 or more for the year, a bar that 15.3% on any meaningful profit clears on its own, before income tax is even considered.
The number to carry
Multiply your expected annual profit by 0.1413 and you have your self-employment tax to within a rounding error, provided you stay under the $184,500 Social Security ceiling and above the $400 floor. Set that aside as it comes in rather than reconstructing it in September.
Then run the real figure, income tax included, in the 1099 tax estimator, and check it against the safe harbor amount you cannot be penalised for missing before you decide what to send on September 15. If the profit is large enough that the number stings, the next question is whether a Solo 401(k) or SEP-IRA should be absorbing some of it before year end. That lever closes on December 31, and September is a much better time to pull it than Christmas week. And if your 2025 return is still sitting on an extension, October 15 moves the filing date and not the payment date — the balance has been accruing since April.
