US · Self-employment
US self-employment tax explained: what freelancers owe and how much to set aside
Self-employed in the US? You pay both halves of Social Security and Medicare on top of income tax. Here's how self-employment tax works for 2026, the deductions that soften it, and a set-aside table by profit.
By Stuart Mathieson · · 6 min read
I'm a freelancer myself, though in Scotland rather than the States, and the two systems share one unwelcome surprise: once you work for yourself, nobody quietly pays your tax through the year for you. In the US, the extra that catches new freelancers out has a name: self-employment tax.
When you're an employee, your employer pays half your Social Security and Medicare and withholds the other half from your pay. When you work for yourself, you're both employer and employee, so you pay both halves. This guide covers tax year 2026, using the IRS's figures and the rules my self-employment tax calculator follows.
Who pays it
If your net earnings from self-employment are $400 or more in a year, you owe self-employment tax and need to file Schedule SE with your return. That covers sole proprietors, independent contractors paid on a 1099, single-member LLCs that haven't chosen to be taxed as a corporation, and general partners in a partnership.
"Net earnings" means profit: your business income minus your business expenses, not your total invoices.
How it's worked out
Self-employment tax is 15.3%: 12.4% for Social Security and 2.9% for Medicare. But it isn't charged on your whole profit. First, you multiply your profit by 92.35%. That reduction mirrors the fact that employees don't pay FICA on the employer's half of it.
Social Security = 12.4% × net earnings, up to $184,500 (2026)
Medicare = 2.9% × all net earnings
On a profit of $80,000:
| Step | Amount |
|---|---|
| Profit | $80,000.00 |
| Net earnings (× 92.35%) | $73,880.00 |
| Social Security (12.4%) | $9,161.12 |
| Medicare (2.9%) | $2,142.52 |
| Self-employment tax | $11,303.64 |
That's about 14.1% of profit, before any income tax.
The Social Security cap
The 12.4% Social Security part stops at the same wage base as employees' - $184,500 for 2026. If you also have a job, your W-2 wages use up the cap first. Someone earning $170,000 in a salaried job with a $30,000 side business only pays the 12.4% on the first $14,500 of their net earnings, so their self-employment tax is about $2,601 rather than $4,239. The 2.9% Medicare part has no cap.
Additional Medicare Tax
On top, there's a 0.9% Additional Medicare Tax on wages and self-employment income above $200,000 if you're single or head of household, or $250,000 if you're married filing jointly. Your W-2 wages count towards the threshold first.
The deductions that soften it
Two deductions make the overall bill noticeably smaller than income tax plus 15.3%.
Half of your self-employment tax is deductible. You subtract the "employer-equivalent" half - $5,651.82 in the example above - from your income before income tax is worked out. It doesn't reduce the self-employment tax itself, only your income tax.
The qualified business income (QBI) deduction. Most sole proprietors can deduct up to 20% of their qualified business income - roughly profit less the deductible half of self-employment tax - capped at 20% of taxable income before the deduction. The 2025 tax law made this deduction permanent. Above taxable income of about $201,750 ($403,500 married filing jointly) the deduction can be limited, especially for "specified service" businesses such as consulting, law and accounting, and the rules get complicated. Below that, it's usually the full 20%.
Putting it together: $80,000 of profit, single
- Self-employment tax: $11,303.64
- Adjusted gross income: $80,000 − $5,651.82 = $74,348.18
- After the $16,100 standard deduction: $58,248.18
- QBI deduction: 20% of ($80,000 − $5,651.82), capped at 20% of $58,248.18 = $11,649.64
- Taxable income: $46,598.54, taxed at 10% and 12%: $5,343.83
Total federal tax on the business: about $16,647, or 20.8% of profit. Income tax is less than half of it - the self-employment tax is the bigger line.
How much to set aside
| Profit | Self-employment tax | Income tax | Total | Share of profit | Each quarterly payment |
|---|---|---|---|---|---|
| $30,000 | $4,239 | $942 | $5,181 | 17.3% | $1,295 |
| $50,000 | $7,065 | $2,667 | $9,732 | 19.5% | $2,433 |
| $80,000 | $11,304 | $5,344 | $16,647 | 20.8% | $4,162 |
| $120,000 | $16,955 | $11,506 | $28,462 | 23.7% | $7,115 |
| $200,000 | $28,234 | $25,196 | $53,431 | 26.7% | $13,358 |
These are federal figures only, using the standard deduction and the full QBI deduction. State income tax comes on top, and in some states it's several percent more. If you have a job as well, your wages push the business profit into higher brackets, so your share will be higher than this table shows even though the Social Security cap may help.
A rule of thumb many freelancers use is to move 25-30% of every payment into a separate account the day it arrives. The table shows why: for most profit levels that covers federal tax with something left for the state.
Paying during the year: estimated tax
Nobody withholds tax from freelance income, so the IRS expects you to pay as you go through quarterly estimated tax payments, usually with Form 1040-ES or online. You generally have to pay estimated tax if you expect to owe $1,000 or more for the year after any withholding.
| Income earned | Payment due |
|---|---|
| 1 January to 31 March | 15 April 2026 |
| 1 April to 31 May | 15 June 2026 |
| 1 June to 31 August | 15 September 2026 |
| 1 September to 31 December | 15 January 2027 |
The periods aren't equal quarters, which trips people up. When a date falls on a weekend or holiday, the next working day counts.
To avoid an underpayment penalty, your payments plus any withholding generally need to cover the smaller of:
- 90% of this year's tax, or
- 100% of last year's tax - 110% if last year's adjusted gross income was over $150,000 ($75,000 married filing separately).
The "last year" route is the useful one when income is lumpy, because you know the number in advance. In your first year of freelancing, though, last year's tax may have been covered by an employer, so it's worth setting money aside from the very first invoice.
How it compares with the UK
Since I work for myself in Scotland, the comparison is hard to resist. A UK sole trader pays Class 4 National Insurance of 6% on profits between £12,570 and £50,270 and 2% above that. On £50,000 of profit, that's about £2,246 - roughly 4.5%. The US equivalent on $50,000 is $7,065, or 14.1%. The US figure does buy Social Security and Medicare entitlement, which is the trade-off. The UK also has its own version of the first-year surprise, which I've written about in setting tax aside as a UK freelancer.
Run your own numbers
The self-employment tax calculator takes your profit, filing status and any W-2 wages, and shows the self-employment tax, the income tax attributable to the business, and a quarterly payment. It covers federal tax for a straightforward sole proprietor. It doesn't include state tax, health insurance or retirement deductions for the self-employed, or the QBI limits above the thresholds. If your profit is heading past six figures, or you're weighing up an S corporation, that's the point to talk to a CPA or enrolled agent.
Run your own numbers
Written by Stuart Mathieson
I'm a freelance web developer based in Scotland, and I build and maintain every calculator on this site myself. I check the figures in these guides against HMRC, the IRS and the other official sources listed below, but I'm not a tax adviser - for decisions that matter, talk to one. More about me.